Before the FCC 95-395
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of ) )
Amendment of Parts 2 and 90 of the ) PR Docket No. 89-553
Commission's Rules to Provide for the )
Use of 200 Channels Outside the )
Designated Filing Areas in the )
896-901 MHz and the 935-940 MHz Bands )
Allotted to the Specialized Mobile Radio Pool )
)
Implementation of Section 309(j) )
of the Communications Act - ) PP Docket No. 93-253
Competitive Bidding ) )
Implementation of Sections 3(n) and 322 )
of the Communications Act ) GN Docket No. 93-252
SECOND ORDER ON RECONSIDERATION AND
SEVENTH REPORT AND ORDER
Adopted: September 14, 1995 Released: September 14, 1995
By the Commission: Commissioner Barrett issuing a statement.
TABLE OF CONTENTS
Paragraph
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . .1
II. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . .2
III. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 22
IV. SECOND ORDER ON RECONSIDERATION
A. Coverage Requirements. . . . . . . . . . . . . . . . 27
B. Treatment of Incumbents
1. MTA Licensee's Interference Protection Obligations to Incumbents35
2. Incumbents' Interference Protection Obligations to MTA Licensee38
C. Secondary Site Licensing . . . . . . . . . . . . . . 43
D. Finders' Preference Program. . . . . . . . . . . . . 48
E. Loading Requirements . . . . . . . . . . . . . . . . 50
F. Discontinuance of Operation. . . . . . . . . . . . . 54
G. Foreign Ownership Waivers. . . . . . . . . . . . . . 57
V. SEVENTH REPORT AND ORDER
A. Competitive Bidding Issues
1. Competitive Bidding Design . . . . . . . . . . . 60
2. License Grouping . . . . . . . . . . . . . . . .66
B. Bidding Issues
1. Bidding Procedures . . . . . . . . . . . . . . . 67
2. Bid Increments and Tie Bids. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . .
. . . . . . . . . . .69
3. Stopping Rules . . . . . . . . . . . . . . . . . 73
4. Duration of Bidding Rounds . . . . . . . . . . . 78
5. Activity Rules . . . . . . . . . . . . . . . . . 80
6. Rules Prohibiting Collusion. . . . . . . . . . 88
C. Procedural and Payment Issues
1. Pre-auction Application Procedures . . . . . . . 95
2. Amendments and Modifications . . . . . . . . . .103
3. Upfront Payments . . . . . . . . . . . . . . . .107
4. Down Payments and Full Payments. . . . . . . . .114
5. Bid Withdrawal, Default, and Disqualification. .118
6. Long-Form Applications . . . . . . . . . . . . .125
7. Petitions to Deny and Limitations on Settlements. . .126
8. Transfer Disclosure Requirements . . . . . . . .128
9. Performance Requirements . . . . . . . . . . . 130
E. Treatment of Designated Entities
1. Overview, Objectives and Impact of Adarand Constructors, Inc. v. Peña 131
2. Eligibility for Bidding Credits, Installment Payments and Reduced Down Payments 141
3. Bidding Credits. . . . . . . . . . . . . . . . 157
4. Reduced Down Payment/Installment Payments. . . 166
5. Transfer Restrictions and Unjust Enrichment Provisions 171
6. Partitioning . . . . . . . . . . . . . . . . . 175
7. Reduced Upfront Payments . . . . . . . . . . . .180
8. Set-aside Spectrum . . . . . . . . . . . . . . .181
9. Other Matters. . . . . . . . . . . . . . . . . .185
VI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . .187
VII. PROCEDURAL MATTERS AND ORDERING CLAUSES. . . . . . . . .188
APPENDIX A - FINAL RULES
APPENDIX B - FINAL REGULATORY FLEXIBILITY ANALYSIS
APPENDIX C - PETITIONERS AND COMMENTERS
I. INTRODUCTION
1. In this Second Order on Reconsideration and Seventh Report and Order, we adopt
final auction rules for the 900 MHz SMR service and address reconsideration petitions
concerning the service rules adopted in the Second Report and Order and Second Further Notice
of Proposed Rule Making ("Second R&O and Second Further Notice"). The rules adopted and
the policies set forth herein will permit licensing the 900 MHz SMR service in a fast, fair and
efficient manner, and will promote competition. At the same time, they will protect incumbents'
current services to the public while providing such incumbents with a more flexible environment
in which to expand their systems.
II. EXECUTIVE SUMMARY
2. The following paragraphs summarize the principal decisions made in this Second
Order on Reconsideration regarding service rules, and those made in the Seventh Report and
Order regarding auction rules.
A. Second Order on Reconsideration: Service Rules
3. As decided in the CMRS Third Report & Order, the 900 MHz SMR band will be
divided into 20 ten-channel blocks in each of 51 service areas based on Major Trading Areas
("MTAs"), which match the blocks previously licensed for the Designated Filing Areas
("DFAs"). Each MTA license will authorize the licensee to operate throughout the MTA on the
designated channels except where a co-channel incumbent licensee already is operating. MTA
licensees also will be allowed to aggregate multiple blocks within an MTA and to aggregate
blocks geographically in multiple MTAs.
4. As decided in the Second R&O and Second Further Notice, MTA licensees in this
service will be required to meet coverage requirements of one-third of the population in the
service area within three years of the initial license grant and two-thirds of the population within
five years. Alternatively, a licensee may make a showing at five years that it is providing
"substantial service." The Commission denies reconsideration of these benchmarks, and
reiterates that MTA licensees must satisfy these requirements regardless of the area or percentage
of the MTA population that is served by incumbent licensees. We clarify that MTA licensees
may use options such as resale or management agreements to fulfill the coverage requirements.
5. To ensure that incumbent licensees receive protection from interference by MTA
licensees, the Second R&O and Second Further Notice provides that MTA licensees either must
maintain a minimum 113 kilometer (70 mile) geographic separation or comply with our short-spacing rules with respect to all incumbent facilities in their service area or in adjacent MTAs.
We affirm our intention to allow MTA licensees to use short-spacing rules to comply with
interference protection standards, and do not believe it will result in a plethora of interference
disputes at the Commission. We also affirm our adoption of the 40 dBu median field strength
contour as the protected service area in which incumbents may modify or add facilities, and
reject petitioners' requests to use the 22 dBu contour instead. We will allow, however,
incumbents to negotiate with wide area licensees to expand the incumbents' service areas. We
also will reissue a single "partitioned" license to incumbents who are not successful bidders for
the MTAs in which they are currently operating in exchange for their multiple site licenses.
6. As decided in the Second R&O & Second Further Notice, no secondary site licenses
will be granted once an MTA licensee has been selected. We believe it is important to provide
some degree of reliability to potential MTA bidders that the spectrum upon which they are
bidding will not become subsequently encumbered with secondary sites. We clarify that all
pending finders' preference requests for 900 MHz SMR licenses will be processed, but we are
eliminating future finders' preference for the 900 MHz SMR service. As provided by our rules,
any stations licensed to incumbents that are not constructed or placed in operation will revert
automatically to the MTA licensee for that channel block.
7. We deny further reconsideration of our decisions in the CMRS Third Report & Order
and the Second R&O and Second Further Notice with respect to loading requirements in the 900
MHz service, as petitioners have raised no new arguments that would merit reconsideration.
Consequently, incumbent 900 MHz SMR licensees will continue to be subject to the loading
requirements that were in effect when they were licensed.
8. We clarify that our amended rule regarding discontinuance of operation (Section
90.631(f)), which provides that stations taken out of service for 90 consecutive days are
considered permanently discontinued, applies only to stations that were taken out of service after
June 5, 1995 (the effective date of the rule). The former rule provided that stations taken out of
service for 12 months were considered permanently discontinued. Consequently, stations that
were taken out of service prior to June 5, 1995, are entitled to stay out of service for the
remainder of the original 12 months provided in the former rule, before they will be considered
permanently discontinued. Those stations taken out of service on or after June 5, 1995, will be
considered permanently discontinued after 90 days. With regard to wide-area SMR licensees
that are replacing high power analog sites with low power digital sites, however, we will deem
all the base stations "in operation" if the system meets the standards and conditions set out in
Fleet Call, Inc.
B. Seventh Report and Order
1. Auction Rules
9. A total of 1,020 MTA licenses will be awarded in the 900 MHz SMR service. We
will use a single simultaneous multiple round auction to award these licenses, because the
licenses are interdependent, and licensees are likely to aggregate and/or substitute across
spectrum blocks and geographic areas. Both incumbents and new entrants are eligible to bid for
all MTA licenses subject only to the spectrum cap in Section 20.6 of the Commission's Rules.
All applicants for MTA licenses are treated as initial applicants for public notice, application
processing, and auction purposes. The Wireless Telecommunications Bureau will announce the
time and place of the auction and provide additional information to bidders by future public
notice.
10. Applicants will apply for the 900 MHz SMR auction by filing a short-form
application (FCC Form 175) and paying an upfront payment. We adopt the standard upfront
payment formula of $0.02 per pop-MHz, based on the number of 10-channel blocks in each
MTA identified on the applicant's Form 175 and the total MTA population. The Wireless
Telecommunications Bureau will announce, by public notice, the population calculation of each
block in the MTA, using a formula that takes into account incumbents within the MTA. We also
adopt the Milgrom-Wilson activity rule used in previous multiple-round simultaneous auctions,
which requires bidders to declare their maximum eligibility in terms of MHz-pops and limits
them to bidding on licenses encompassing no more than the MHz-pops covered by their upfront
payment.
11. Each applicant will be required to specify on its FCC Form 175 its classification,
status as a designated entity (if applicable), markets and frequency blocks for which it applied,
and persons authorized to place or withdraw bids. Applicants must identify any arrangements or
agreements with other parties relating to the licenses that are being auctioned and certify that
there are no arrangements other than those specified. Applicants may correct minor defects in
their short-form applications prior to the auction, but may not make any major modifications to
their applications, including geographic license area changes, cognizable ownership changes or
changes in the identification of parties to bidding consortia, until after the auction. Applicants
may modify their short-form applications to reflect formation of consortia or changes in
ownership at any time before or during an auction, provided such changes do not result in a
change in control of the applicant, and provided that the parties forming consortia or entering
into ownership agreements have not applied for licenses in any of the same geographic license
areas. In instances where only a single applicant has applied for a particular MTA channel block,
the Commission will cancel the auction for that block and establish a deadline for filing of the
applicant's long-form application. In all instances where mutually exclusive applications are
filed, the MTA channel block will be included in the auction.
12. The timing and duration of auction rounds will be determined by the Wireless
Telecommunications Bureau and announced by public notice. As in prior auctions, we expect to
start the auction with relatively large bid increments and reduce increments as bidding activity
falls. We will use a simultaneous stopping rule for this auction to afford bidders flexibility to
pursue back-up strategies, and to ensure that bidders will not hold back bids until the final round.
During the auction, we will retain the discretion to declare that the auction will end after a
specified number of additional rounds.
13. We will specify bid increments, i.e., the amount or percentage by which the bid must
be raised above the previous round's high bid in order to be accepted as a valid bid in the current
bidding round. The application of a minimum bid increment helps to ensure that the auction
closes within a reasonable period and is expressed in both a percentage and fixed dollar amount.
We may impose a minimum bid increment of five percent or $0.02 per pop-MHz, whichever is
greater, but we also retain the discretion to set, vary and announce, before or during the auction,
the minimum bid increments for licenses over the course of an auction.
14. We will use bid withdrawal and default rules for this auction similar to those used in
prior auctions. Under these rules, any bidder that withdraws a high bid during an auction before
the Commission declares bidding closed must reimburse the Commission for the difference
between the amount of the ultimate winning bid and the withdrawn bid if the winning bid is
lower than the withdrawn bid. An auction winner defaulting after the close of the auction will
have to make an additional payment equal to the lesser of three percent of the subsequent
winning bid or three percent of the amount of the defaulting bid. In the event that an auction
winner defaults or is disqualified, or if its license is revoked or terminated, the Commission will
re-auction the license, except that we may offer the license to the second highest bidder if the
default occurs within five days after the auction closes.
15. At the conclusion of the auction, winning bidders must supplement their upfront
payments and file their long-form applications (FCC Form 600). The upfront payment must be
supplemented in an amount sufficient to bring the winning bidder's deposit up to 20 percent of its
winning bid within five days after the close of the auction. Designated entities eligible for
installment payments, however, must bring their deposits up to five percent of the winning bid
within five days after the close of the auction. Once each applicant has filed its long form and
submitted its down payment, the Wireless Telecommunications Bureau will issue a public notice
announcing the application's acceptance for filing and open a 30-day window for filing petitions
to deny.
16. The 900 MHz SMR auction will be subject to the same regulatory safeguards as prior
auctions to prevent applicants from colluding during the auction or obtaining unjust enrichment
from subsequent transfer of the license. To prevent collusion, bidders who have applied for
licenses in any of the same geographic license areas on their short-form applications may not
cooperate, collaborate, discuss, or disclose the substance of their bids or strategies with other
bidders except pursuant to a consortium or arrangement identified in the short-form application.
Bidders also must attach an exhibit to the Form 600 explaining the terms, conditions, and parties
involved in any bidding arrangement. With respect to transfers, licensees transferring their
licenses within three years of the initial license grant must disclose to the Commission all
contracts and other documentation associated with the transfer.
2. Designated Entities
17. Because of the large number of available licenses and the presence of incumbents
throughout the 900 MHz SMR band, we will not create an entrepreneurs' block in this service.
Nevertheless, we adopt several provisions for bidding in the 900 MHz auction by small
businesses. Taking commenters' suggestions into account, we define two categories of small
businesses: (1) an entity that, together with affiliates, has average gross revenues for the three
preceding years of $3 million or less; and (2) an entity that, together with affiliates, has average
gross revenues for the three preceding years of $15 million or less. We will define any investor
in the applicant with a 20 percent or greater interest to be attributable for purposes of determining
small business status. The 20 percent attribution threshold is derived from the measure of SMR
attribution for purposes of applying the CMRS spectrum cap. In sum, we will consider the gross
revenues of the entity and its affiliates and its attributable investors and affiliates.
18. Under this "tiered" approach, small businesses falling under the $3 million
benchmark are eligible for a 15 percent bidding credit on any MTA license; those falling under
the $15 million benchmark are eligible for a 10 percent bidding credit. All small businesses may
make a reduced down payment (five percent of the winning bid following the close of the
auction, with the balance of the down payment paid five days after a Public Notice announcing
that the Commission is prepared to grant the license), and are entitled to pay the bid balance in
quarterly installments over the remaining license term. Small businesses falling under the $3
million benchmark will be able to make interest-only payments for the first five years of the
license term; small businesses falling under the $15 million benchmark will be able to make
interest-only payments for the first two years of the license term. We believe that broadening the
scope of opportunities for small businesses, particularly on a tiered basis, will result in
substantial participation by women and minorities, and we believe that the expected capital
outlay for the 900 MHz service will not present the same type of obstacles for those entities as a
more costly spectrum-based service like PCS.
19. We do not adopt reduced upfront payments for small businesses in the 900 MHz
service but will allow partitioning for rural telephone companies, similar to those that we have
applied to broadband PCS.
20. Small businesses entitled to special provisions in the 900 MHz SMR service seeking
to transfer their licenses, as a condition to approval of the transfer, must remit to the government
a payment equal to a portion of the total value of the benefit conferred by the government. Thus,
a small business that received bidding credits which seeks transfer or assignment of a license to
an entity that is not a small business or does not qualify as a smaller business under Section
90.814(b)(1), will be required to reimburse the government for the amount of the bidding credit,
plus interest at the rate imposed for installment financing at the time the license was awarded,
before transfer will be permitted. The amount of this reimbursement will be reduced over time
as follows: a transfer in the first two years of the license term will result in a reimbursement of
100 percent of the value of the bidding credit: in year three of the license term the payment will
be 75 percent; in year four the payment will be 50 percent and in year five the payment will be
25 percent, after which there will be no assessment. If a small business under the $3 million
definition seeks to transfer or assign a license to a small business under the $15 million
definition, for the purposes of determining the amount of payment, the value of the bidding credit
is 5 percent, the difference between the 10 and 15 percent bidding credits. The 5 percent
difference will be subject to the same percentage reductions over time as specified above. These
reimbursements must be paid back to the U.S. Treasury as a condition of approval of the
assignment or transfer.
21. If a licensee that was awarded installment payments seeks to assign or transfer
control of its license to an entity that is not a small business under Section 90.814(b)(1) during
the term of the license, we will require payment of the remaining principal and any interest
accrued through the date of assignment as a condition of the license assignment or transfer.
Moreover, if a small business under the $3 million definition seeks to assign or transfer control
of a license to a small business under the $15 million definition (that does not qualify for as
favorable an installment payment plan), the installment payment plan for which the acquiring
entity qualifies will become effective immediately upon transfer. However, a licensee may not
switch its payment plan to a more favorable plan. If an investor subsequently purchases an
"attributable" interest in the businesses during the first five years of the license term and, as a
result, the gross revenues or total assets of the business exceed the applicable financial cap,
thereby requiring the applicant to forfeit eligibility for an installment payment scheme, unjust
enrichment provisions also will apply.
III. BACKGROUND
22. The 900 MHz SMR service was established in 1986, when the Commission allocated
200 channel pairs in the 896-901 MHz and 935-940 MHz bands for SMRs in order to alleviate
congestion in the 800 MHz SMR band. To expedite service in major markets where demand
for SMR service was greatest, the Commission used a two-phase licensing process. In Phase I,
licenses were assigned in 46 "Designated Filing Areas" ("DFAs") comprised of the top 50
markets. Following Phase I, the Commission envisioned licensing facilities in areas outside
these markets in Phase II. In the meantime, however, licensing outside the DFAs was frozen
after 1986, when the Commission opened its filing window for the DFAs.
23. In 1989, the Commission adopted a Notice of Proposed Rule Making in PR Docket
89-553 ("NPRM"), proposing to begin Phase II licensing of 900 MHz SMR facilities
nationwide. The NPRM contained proposals intended to add flexibility to 900 MHz SMR
systems. The Commission continued its freeze on licensing outside the DFAs while the rule
making was pending, but did license 900 MHz providers on a secondary basis (i.e., facilities that
may not cause interference to primary licensees and must accept interference from primary
licensees) outside their DFAs to meet growing demand for regional service.
24. In 1993, the Commission adopted a First Report & Order and Further Notice of
Proposed Rule Making in PR Docket 89-553, modifying its Phase II proposal and seeking
comment on whether to license the 900 MHz SMR band to a combination of nationwide,
regional, and local systems. Shortly after the First Report & Order/Further Notice, Congress
amended the Communications Act to reclassify most SMR licensees as Commercial Mobile
Radio Service (CMRS) providers, and to establish the Commission's authority to use competitive
bidding to select from among mutually exclusive applicants for certain licensed services.
Accordingly, the Commission deferred further consideration of Phase II and incorporated the 900
MHz docket (as well as the companion docket relating to 800 MHz SMR), into its CMRS
proceeding to ensure that the regulation of all SMRs would be consistent with the regulation of
competing CMRS services, such as cellular and PCS, and to consider the impact of auction
authority on the record of the pending 900 MHz proceeding.
25. In the CMRS Third Report and Order, the Commission further revised its Phase II
proposals and established the broad outlines for the completion of licensing in the 900 MHz
SMR band. The Commission concluded that (1) the 900 MHz SMR band will be licensed in 20
ten-channel blocks using MTAs as service areas; (2) licensing of mutually exclusive applicants
for this spectrum will be based on competitive bidding; and (3) incumbent licensees in the band
will retain the right to operate under their existing authorizations, but will be required to obtain
the relevant MTA license (or obtain the consent of the MTA licensee) to be able to expand their
systems. The Commission noted that some licensees had been granted secondary
authorizations to construct facilities outside of the DFAs, so they could link facilities in different
markets. With respect to those unprotected sites (i.e., "secondary sites"), the Commission
stated that those that were licensed on or before August 9, 1994, would be entitled to primary site
protection. The Commission also eliminated loading requirements for future MTA licensees,
but retained them for incumbent 900 MHz SMR licensees that do not obtain MTA licenses.
26. While the CMRS Third Report & Order established the framework for 900 MHz
licensing, the Commission left the adoption of specific auction and service rules for the Phase II
Order. In the Second Report and Order and Second Further Notice of Proposed Rule Making,
we adopted final service rules, and requested comment on proposed auction rules. We
established technical and operational rules for the new MTA licensees, and also defined the
rights of incumbent SMR licensees already operating in the 900 MHz band. We also addressed
issues raised on reconsideration of the CMRS Third Report & Order pertaining specifically to the
900 MHz SMR service. The Further Notice requested comment on further aspects of the
Commission's decision in the CMRS Third Report & Order to license the 900 MHz band on an
MTA basis, and to use competitive bidding to select from among mutually exclusive applicants.
We set forth proposals for new licensing rules and auction procedures for the service, including
provisions for designated entities. We later issued a Public Notice requesting further comment
on the impact of the Supreme Court's subsequent decision in Adarand Constructors Inc. v.
Peña on our proposed treatment of designated entities in the Second R&O and Second Further
Notice.
IV. SECOND ORDER ON RECONSIDERATION
A. Coverage Requirements
27. Background. In the Second R&O and Second Further Notice, the Commission
adopted Section 90.665(c), which requires 900 MHz MTA licensees to provide coverage to one-third of the population of their service area within three years of initial license grant and to two-thirds of the population of their service area within five years or, at the five year mark, to submit
a showing of substantial service. We stated that this requirement fits squarely between the 10
MHz broadband PCS rules (one-fourth population coverage at five years or substantial service)
and the narrowband PCS rules (one-fourth population coverage at five years, three-fourths
population coverage at 10 years).
28. Petitions. By and large, petitioners request that we both amend the coverage
requirements and clarify certain aspects of the rule. Several petitioners request that the
Commission adopt a less stringent coverage requirement than that contained in Section
90.665(c). In particular, Personal Communications Industry Association ("PCIA") and
Advanced Mobilecomm, Inc. ("AMI") contend that it will be difficult for an MTA licensee to
meet these coverage requirements unless it can establish a relationship with the incumbent
licensee which may already cover significantly populated areas of an MTA. Both petitioners
point to the Los Angeles-San Diego MTA as an example of an anomaly created by the rule.
AMI states that, if a San Diego incumbent wishes to obtain an MTA license to expand its San
Diego offering, it would have to reach an agreement with the incumbent Los Angeles licensees in
order to meet the MTA coverage requirement, as well as those in Las Vegas. As AMI notes,
there is little roaming crossover, as Las Vegas was not one of the DFAs that was licensed in
1987. Conversely, PCIA points out that, if a potential applicant wishes to serve only Las
Vegas, it would have to reach agreements with the Los Angeles and San Diego incumbents to
meet coverage requirements. AMI elaborates that the problem with establishing such a
relationship is that the equipment with which each licensee already has constructed may be
totally incompatible with that of the potential MTA licensee.
29. Both RAM and Geotek request that the Commission clarify Section 90.665(b) and
(d) to indicate that an incumbent licensee who becomes the MTA licensee, then fails to satisfy
the coverage requirements, does not forfeit the entire MTA license but, retains those facilities
licensed to it prior to the auction. Petitioners contend that, if the Commission intends to subject
incumbents to forfeiture of the entire MTA license, including their existing systems, incumbents
will be dissuaded from participating in the auction and non-incumbents will be given an unfair
competitive advantage. Geotek states that, absent clarification, an incumbent licensee will be
risking substantial capital to bid on the MTA license, as well as its prior investment in the license
and facilities associated with its existing system.
30. Southern California Edison Company ("SCE") requests a number of clarifications of
the Commission's coverage requirements. First, SCE requests that the Commission clarify
Section 90.665(c) to indicate precisely how population coverage will be counted. SCE urges
the Commission to choose a geographically determined benchmark, such as the U.S. Census
Bureau's census tracts, to allow for more precise computation of population coverage.
Otherwise, SCE contends, since county population is essential to calculating MTA population, an
MTA licensee may provide coverage to one corner of a county and claim credit for the entire
county. SCE predicts that the failure to clarify population computation methodology will result
in protracted disputes between MTA license holders and the Commission. Second, SCE
requests that the Commission indicate precisely which edition and population table of Rand
McNally's Commercial Atlas and Marketing Guide the Commission will use to determine
whether an MTA licensee has complied with Section 90.665(c), a clarification which SCE deems
critical in view of the five years that have passed since the last U.S. Census. Third, SCE
requests clarification of the coverage rule to indicate that MTA licensees must meet coverage
requirements regardless of the percentage of the MTA population already served by incumbent
licensees.
31. Discussion. We will retain the coverage requirements outlined in Section 90.665(c),
which require 900 MHz MTA licensees to provide coverage to one-third of the population of
their service area within three years of initial license grant and to two-thirds of the population of
their service area within five years or, at the five year mark, to submit a showing of substantial
service. We are convinced that these benchmarks are not too stringent, particularly in light of the
"substantial showing" mechanism designed for specialized users, who may not be able to meet
the two-thirds requirement due to individualized circumstances. We will review these showings
on a case-by-case basis. We believe that any winning MTA bidder should have the ability to
meet these coverage requirements.
32. The percentage of population served by the incumbent in a DFA is a factor that MTA
bidders will have to take into account in determining whether and how it will meet the coverage
requirements of a particular MTA on which it seeks to bid. We expect bidders to have a realistic
plan for meeting coverage requirements, by investigating the possibility of resale, affiliation with
other bidders, or buyouts of incumbents. Those with an interest in serving only part of an MTA
also are free to enter into private contractual arrangements with the MTA licensee. If a bidder
expects that it will not be able to reach an agreement with an incumbent, that factor should be
considered in the bidding strategy. Developing separate coverage requirements for the portions
of the MTA that currently are unserved by incumbents is tantamount to establishing the 900
MHz SMR auction as an "unserved area" auction. That principle is at odds with the
Commission's policy for the 900 MHz SMR service of providing the system user with ubiquitous
regional coverage. Therefore, we disagree with PCIA and AMI regarding coverage
requirements. We will not condition compliance with Section 90.665(c) on the success (or lack
thereof) of the MTA's licensee's ability to reach a satisfactory agreement with the incumbent.
Thus, the MTA licensee must meet these coverage requirements regardless of the presence of an
incumbent licensee.
33. We do, however, agree with RAM and Geotek and will modify Section 90.665(d) to
state that an MTA licensee who also is the incumbent within the MTA will not forfeit the entire
MTA for failure to meet coverage requirements. Such licensees will forfeit only the spectrum
gained in the MTA license, and not the spectrum to which it originally was licensed as the
incumbent in the DFA (including any secondary sites that have achieved primary status). In
other words, only the right to use channels any place in the MTA will be forfeited, but any
channels for which individual sites were constructed and operating prior to auction will be
retained by the MTA licensee.
34. Finally, in response to SCE's request, we will use the 1992 edition of Rand McNally's
Commercial Atlas and Marketing Guide (which is based on the April 1, 1990 U.S. Census) in
determining whether the licensee has met its coverage requirement. Under our standard, a
licensee will not be able to claim coverage of an entire county if it covers only a small portion of
the county. As discussed at ¶ 112, infra, the Commission will provide, by Public Notice,
population information corresponding to each MTA, which also will be used to calculate the
upfront payment.
B. Treatment of Incumbents
1. MTA Licensee's Interference Protection Obligations to Incumbents
35. Background. The Commission stated in the Second R&O and Second Further
Notice, that MTA licensees will be required to afford interference protection to incumbent SMR
systems, as provided in Section 90.621(b), in one of three ways: (1) By locating their stations at
least 113 km (70 miles) from any incumbent's facilities; (2) by complying with the co-channel
separation standards in the short-spacing rule (§ 90.621(b)(4)), if they seek to operate stations
located less than 113 km from an incumbent's facilities; or (3) by negotiating an even shorter
distance with the incumbent licensee.
36. Petitions. Geotek requests that the Commission require the MTA licensee to comply
with the minimum distance criteria without short spacing in order to avoid having the MTA
licensee contain the growth of an incumbent's geographic service area. Geotek notes that this is
of particular concern in markets in which an incumbent operates with few or one transmitter(s)
and the MTA licensee surrounds the incumbent, thereby preventing the incumbent from making
modifications or supplementing its service. Geotek claims that allowing the incumbents more
flexibility will reduce the Commission's involvement in co-channel disputes.
37. Discussion. We will retain the rule as adopted. Geotek has not presented a sufficient
justification to warrant our elimination of the short-spacing option in defining the MTA
licensee's interference obligations. We find no merit to Geotek's claim that short-spaced MTA
licensees will "box in" incumbents, as we have considered and rejected similar arguments in the
past. When we developed the short-spacing table in the Report and Order for PR Docket 93-60, Fleet Call (now Nextel) argued that the short-spacing table would impede the development
of wide-area digital SMR systems. We denied this request and decided that the use of the short-spacing table offered a balance between increased spectrum efficiency, adequate co-channel
protection and administrative convenience. We continue to believe the use of the short-spacing
table will afford maximum flexibility to the MTA licensee, will allow incumbents to fill in "dead
spots," and still will protect the incumbent licensee from actual interference. Considering the
likelihood that incumbent licensees will bid on the MTAs that surround their systems, we believe
that the short-spacing option will not result in a plethora of interference disputes to be resolved
by the Commission.
2. Incumbents' Interference Protection Obligations to MTA Licensee
38. Background. In the Second R&O and Second Further Notice, the Commission
defined the incumbent licensee's existing service area by its originally-licensed 40 dBu median
field strength contour. We rejected commenters' suggestions that we use the 22 dBu contour as
an incumbent's protected service area, because we have consistently applied the 40 dBu signal
strength contour to incumbent operations. We noted that incumbents would be able to add new
transmitters in their existing service area as long as they did not expand their original 40 dBu
signal strength contour. We also required incumbents to notify the Commission of any changes
in technical parameters or the construction of additional stations with a minor modification
application. We stated our intention to allow incumbents to continue existing operations
without harmful interference and to give them flexibility to modify or augment their system
without encroaching on the MTA licensee's operations.
39. Petitions. Several petitioners urge the Commission to reconsider its rejection of the
22 dBu contour as the definition of an incumbents' service area. Geotek contends that the 40
dBu contour is too restrictive, and suggests that the Commission use the 40 dBu contour to
define the incumbent's protected contour while allowing modifications within the 22 dBu
contour. Geotek states that the proposed modifications would neither offer incumbents any
more interference protection than they would receive under the current rules, nor expand
incumbents' service area. RAM insists that the 22 dBu contour definition enhances an
incumbent's operational flexibility and ability to serve more effectively customers in its service
area without impinging on the adjacent MTA licensee's operations. AMTA suggests that the
Commission allow incumbents to implement additional or modified facilities at any site that does
not expand the 22 dBu contour of an existing site, which facilities would not have to be protected
from interference from subsequently granted MTA licenses. AMTA claims that incumbents
could cover what otherwise would be "dead spots" without adversely affecting the MTA
licensee. RAM also submits an engineering statement purporting to show many instances in
which existing systems have added new sites to intensify coverage of already-served areas or fill
in "dead spots," which extends the 40 dBu contour but does not increase the interference
contour.
40. RAM also argues that the Commission should grant wide-area licenses to
incumbents, rather than site-by-site licensing. RAM contends that, to give existing licensees
flexibility to operate within their protected areas, the Commission should allow incumbents to
trade in their site-specific licenses for a wide-area license, demarcated by the aggregate of the 40
dBu contours around each of the incumbent's contiguous sites operating in the same ten-channel
block. RAM suggests that where the incumbent does not apply for, or does not win, the MTA
license, it should be able to trade in its "site-by-site" licenses for a license that accurately reflects
the 40 dBu contour to which it is now entitled.
41. Discussion. We are not persuaded to change our determination to use the 40 dBu
contour to define an incumbent's service area in which they can make modifications without
Commission action, rather than the 22 dBu contour, as petitioners request. As RAM points out,
we recognized in the Second R&O and Second Further Notice that there would be instances
where the 40 dBu contour could be expanded without expanding the 22 dBu contour and that it
would occur infrequently. RAM does not dispute this conclusion, nor has it submitted new
information or raised new arguments that would persuade us to change our initial determination.
We continue to believe that the use of the 40 dBu contour to determine the protected service area
strikes the most reasonable balance between the rights of the incumbent to add sites within its
protected contour and the interest of prospective MTA licensees in obtaining clear spectrum.
However, we will modify incumbent notification requirements. All incumbents are prohibited
from expanding their 40 dBu field strength contours. Therefore, we will not require incumbents
who are making modifications to their systems within the 40 dBu signal strength contour to
notify the Commission of modifications to their facilities. Elimination of the notification
requirement in Section 90.667(a) of the Commission's Rules will reduce administrative burdens
on incumbents without increasing problems of signal interference.
42. We will grant RAM's request to allow incumbents to have their licenses reissued if
they are not the successful bidder for the MTA in which they are currently operating. This
procedure, which would be granted post-auction upon the request of the incumbent, would
essentially convert their current site licenses to a single "partitioned" license, authorizing
operations throughout the contiguous and overlapping 40 dBu signal strength contours of the
multiple sites. Incumbents seeking reissued "partitioned" licenses, however, will have to make a
one-time filing of specific information for each of their external base sites that will assist the staff
in updating the Commission's database after the close of the 900 MHz SMR auction. We believe
that facilities added or modified without prior approval or subsequent notification under these
new sections will not receive interference because they will be indirectly protected by the
presence of surrounding stations of the same licensee on the same channel or channel block. If
incumbents seek to gain additional geographic coverage beyond the 40 dBu protected contour,
they must apply for the MTA license.
C. Secondary Site Licensing
43. Background. In the Order on Reconsideration in this docket, we stated our
intention to continue authorizing secondary sites, because it would allow incumbents, many of
whom will seek to become MTA licensees, to continue building out their systems and provide
service to consumers. We also reasoned that such continued authorizations in advance of MTA
licensing would not contribute to spectrum contamination, because such sites are not entitled to
interference protection from MTA licensees, and would have to discontinue operations that
interfere with MTA-licensed operations. In the Second R&O and Second Further Notice, the
Commission decided to afford primary site protection to secondary site applications filed on or
before August 9, 1994, but stated that any applications filed after that date would continue to be
authorized on a secondary site basis. In adopting Section 90.667(b), the Commission also
affirmed its intention not to authorize any secondary sites once the MTA licensee has been
selected.
44. Petitions. AMTA and RAM now request that the Commission continue to grant
applications for secondary sites after an MTA license has been granted. RAM argues that the
restriction in Section 90.667(b) conflicts with the Commission's objective of affording flexibility
to incumbents, and that the continued licensing of such sites will not compromise the MTA
licensing process.
45. Advanced Mobilecomm, Inc. ("AMI") and PCIA request that the Commission clarify
one aspect of our decision to afford primary site status to secondary site authorizations which
were licensed, or for applications that were filed, on or before August 9, 1994. Specifically,
Petitioners request that the Commission require that such secondary sites (which have since been
granted primary status) nevertheless should be required to take into account the original primary
sites of incumbent licensees in adjacent markets. In particular, Advanced Mobilecomm points
to the Los Angeles and San Diego co-channel systems, where the distance between sites is
minimal. Advanced Mobilecomm also requests that the Commission reaffirm the special
requirements for transmitters south of 33º 45' Latitude serving the Los Angeles DFA to protect
subsequent grants in San Diego.
46. Discussion. We deny AMTA and RAM's request regarding post-auction secondary
site licensing. No secondary site licenses will be granted once an MTA licensee has been
selected. Notwithstanding the secondary nature of these sites, we believe it is important to assure
potential MTA bidders that the spectrum upon which they are bidding will not become
subsequently encumbered with secondary sites. We believe the better approach is to require an
incumbent to negotiate with the MTA winner for the right to build additional secondary sites
after the MTA licenses have been awarded, rather than to subject the MTA winners at the outset
to potential disputes with incumbents on issues such as whether a particular secondary site will
cause actual interference. Considering the proximity of the 900 MHz auction, we believe this
approach provides the proper balance between the interest of the MTA bidders in assessing the
value of the MTA, and the interest of the incumbent in building out its system.
47. We reiterate the special requirements for transmitters serving the Los Angeles DFA.
In a 1986 Public Notice, the Commission stated that licensees serving the Los Angeles DFA that
employ base station transmitters located on Santiago Peak and other peaks located south of 33º
45' North Latitude have special conditions attached to their licenses requiring that they protect
subsequent grants to licensees that serve the San Diego DFA.
D. Finders' Preference Program
48. DW Communications, Inc. ("DW") and AMTA request that the Commission modify
Section 90.667 to include licenses granted through the finders' preference program as incumbents
entitled to co-channel interference protection. Section 90.173(k) of the Commission's rules
describes the Commission's "finders' preference program," which provides that an applicant
finding unused spectrum will receive a dispositive preference for use of a channel in the 900
MHz band on an exclusive basis. DW, a finders' preference licensee, is particularly concerned
that, without such clarification, it would not be considered an incumbent and its primary site
authorization would be only secondary in nature. AMTA, going one step further, states that, to
the extent the Commission retains the finders' preference program, it should exempt finders'
preference licenses from the August 9, 1994 primary status cut-off requirement.
49. We will clarify Section 90.667 to include successful applicants for a finders'
preference as "incumbents" within the meaning of the rule. As such, they will be entitled to co-channel protection from an MTA licensee. In response to AMTA's request, the Commission has
stated that the function of finders' preference mechanisms with respect to CMRS services will be
addressed in a future rule making proceeding. While the broad issue of finders' preferences will
be addressed in that proceeding, we are eliminating it immediately for the 900 MHz SMR
service. The Commission will no longer accept finders' preference applications following the
adoption of this Order. The MTA licensee will have the exclusive right to recover
unconstructed or non-operational channels on blocks for which it is licensed.
E. Loading Requirements
50. Background. In the Third Report & Order in GN Docket No. 93-252 ("CMRS Third
Report & Order"), we declined to apply the loading/automatic cancellation requirement for MTA
licensees in the 900 MHz band, but decided to retain the loading requirement for 900 MHz SMR
incumbent licensees. On reconsideration, we affirmed our decision in the CMRS Third Report
and Order to retain the loading requirement for incumbent 900 MHz SMR licensees. We stated
three reasons why we were retaining loading requirements for incumbents: (1) We already had
granted incumbents an additional two year loading extension; (2) incumbents who could not
fulfill loading requirements because they were limited to operating in the DFAs now can obtain
an MTA license; and (3) the public interest is not served by allowing an incumbent who does not
obtain the MTA license to retain spectrum that it has been unable to utilize fully for seven
years. However, we did grant temporary relief in the form of a waiver from the loading rules
to RAM until 30 days after the completion of the 900 MHz auction, based on the unique
circumstances of RAM's substantially-constructed wide area network. Recently, the Wireless
Telecommunications Bureau granted the same type of temporary relief to Celsmer, which
demonstrated that it had constructed a virtually seamless wide area network in Florida, that
already is operating and serving customers.
51. Petitions. Several petitioners once again request that the Commission eliminate the
five-year loading rule for all 900 MHz SMR systems. AMTA, PCIA and Celsmer take issue
with the Commission's justification that 900 MHz SMR is "less mature" than the 800 MHz SMR
service, for which no loading requirements were retained, and AMTA points to PCS as an even
newer service for which there are no loading requirements. AMTA, PCIA and Advanced
Mobilecomm argue that maintaining loading requirements for incumbent 900 MHz SMR
systems, while eliminating the requirements for other services, does not promote regulatory
symmetry. PCIA and Advanced Mobilecomm argue that the MTA licensee has greater rights
than the incumbent, with respect not only to loading but with respect to station cancellation,
whereby the incumbent's unused channels revert to the MTA licensee. Celsmer, PCIA and
Advanced Mobilecomm contend that not all incumbents, particularly independent operators,
have the means to solve their loading problem by obtaining the MTA license. Celsmer, PCIA
and Advanced Mobilecomm blame regulatory delay in concluding the 900 MHz "Phase II"
licensing proceeding for licensees' inability to build out their systems. As an alternative,
AMTA requests that the Commission grant a limited waiver of the loading requirements similar
to that granted to RAM.
52. DW contends finders' preference licensees that have received grants in 1995 should
be specifically exempt from loading requirements. While DW concedes that loading
requirements are justified with respect to 900 MHz SMR licenses granted in 1987, DW also
points out that 800 MHz SMR licensees that were granted on or after June 1, 1993, are not
subject to loading requirements. Therefore, to achieve regulatory symmetry with the 800 MHz
SMR service, DW requests that the Commission amend Section 90.631(i) to exempt licensees of
primary 900 MHz SMR stations whose initial licenses were granted after June 1, 1993.
53. Discussion. We have considered this issue fully in both the CMRS Third Report and
Order and the Second R&O and Second Further Notice. Petitioners have raised no arguments
that would persuade us to reconsider our determination to retain loading requirements for
incumbent 900 MHz SMR licenses. The 900 MHz SMR service has a unique history, in that the
Commission has, at the request of the SMR industry, substantially extended the deadline for
loading systems. It simply does not serve the public interest to allow licensees, who have had a
full seven years to load their system, to retain that spectrum. Although finders' preference
licensees may not have had seven years in which to meet the requirements, they will still be
subject to loading requirements as incumbent licensees. Such finders' preference licensees will
have seven years from their license grant to comply with the loading requirements. We
reemphasize that every incumbent, including a finders' preference licensee, has the opportunity to
bid for an MTA license, for which it will have no loading requirements. Thus, we are not
convinced that incumbents should be entitled to relief from this requirement. Nor are we
convinced that every incumbent is entitled to temporary relief, such as that granted to both RAM
and Celsmer. However, we will entertain waiver petitions and determine, on a case-by-case
basis, whether a licensee, who bears the burden of proof, has made a showing justifying why
loading standards should not apply to its unique situation.
G. Discontinuance of Operation
54. Background. Section 90.931(f) provides that if a station is not placed in operation
within one year, its license cancels automatically. Prior to the Second R&O and Second Further
Notice, the rule also provided that SMR licensees which had discontinued operations for more
than 60 consecutive days were considered permanently discontinued, unless the Commission
received prior notification. If the Commission rejected the licensee's justification, the licensee
was required to resume operations within five days. In the Second R&O and Second Further
Notice, the Commission modified Section 90.631(f) to permit licensees to discontinue operations
for 90 continuous days without being considered permanently discontinued, and removed any
provision for licensees to request an additional extension of this period.
55. Discussion. AMTA and Nextel request that the Commission specify that the 12-month period continues to govern SMR stations discontinued before the effective date of the
rule, and that the 90-day period applies prospectively to stations discontinued after the effective
date of the rule. We agree that SMR stations that were taken out of service before the
effective date of the new rule would not be governed by the 90-day requirement.
56. With regard to wide-area SMR licensees that are replacing high power analog sites
with low power digital sites, however, we will deem all the base stations that comprise the
system "in operation" if the system meets the standards set out in Fleet Call, Inc. In Fleet
Call, the Commission waived the one-year construction requirement so that Fleet Call (now
Nextel) could convert its existing base stations with aggregate loading from single high-power
sites to multiple low-power sites on an integrated basis in six major markets. It is established
that permitting SMR licensees to undergo conversion to multiple low power sites increases
spectrum efficiency, and poses little risk of spectrum warehousing. The conversion process does,
however, result in intervals when, for example, high powered base stations are taken out of
operation in order to bring low-power digital sites on-line. As a result, we will view the entire
wide-area system as "operating" if, consistent with Fleet Call, particular base stations of the
system have discontinued operation as part of the conversion to low power digital sites.
H. Foreign Ownership Waivers
57. Background. In Section 332(c)(6) of the Act, Congress reclassified certain
categories of private land mobile radio providers ("PLMRS") as commercial mobile radio service
("CMRS") providers, and provided for their treatment as common carriers. As a result,
reclassified providers are subject to the Section 310(b) foreign ownership restrictions applicable
to common carriers. Congress provided for limited grandfathering of existing foreign interests
in such licensees through a waiver petition process, whereby any reclassified PLMRS licensee
could petition the Commission by February 10, 1994 for waiver of the application of Section
310(b) to any foreign ownership that lawfully existed as of May 24, 1993. The CMRS First
Report and Order established the specific waiver petition procedure. In the Second R&O and
Second Further Notice, pursuant to a request from Geotek, the Commission decided to
grandfather any timely-filed petitions for waiver of the foreign ownership restrictions filed by an
incumbent in the event the incumbent wins the MTA license.
58. Petitions. Geotek now requests that the Commission extend that grandfathered status
to any 900 MHz SMR MTA license that an incumbent may acquire, not just the MTA in which
the applicant is also the incumbent. In other words, Geotek requests that the grandfathered
status apply to the licensee, not the license. Geotek contends that such an interpretation would
be consistent with common carrier precedent regarding waivers, and is a proper reading of
Section 332(c)(6). Geotek, however, does not cite to any specific Commission precedent in
this area. Geotek also points out that the Commission's interpretation would prohibit reclassified
CMRS providers from holding common carrier licenses, including microwave or other such
licenses used to link base station facilities in the MTA.
59. Discussion. Geotek asks the Commission not only to apply its waiver to other
licenses in the same service, but also to other licenses it may acquire in different services. With
respect to Geotek's first request, we note that since Geotek filed its petition for reconsideration in
this proceeding, the Wireless Telecommunications Bureau has resolved 33 requests for waiver of
Section 310(b), including that filed by Geotek. We do not address Geotek's first request here
as it is an issue discussed in petitions for reconsideration filed in the Bureau's proceeding. We
note, however, that in light of the Bureau's decision, Geotek may bid in the upcoming auction.
In the Foreign Ownership Order, the Bureau granted Geotek's petition, among others, noting
that the waivers apply to additional licenses granted to petitioners in the same service after May
24, 1993 and prior to August 10, 1996, provided the same ownership structure is maintained.
Thus, the Bureau held that such entities may acquire other SMR licenses, including MTA
licenses in which it is not the incumbent. The Bureau stated that this decision was consistent
with Congressional intent in grandfathering the foreign ownership interests of reclassified
licensees and provided greater flexibility for the transition to CMRS reclassification. We note
that in filing a short form application (FCC Form 175), an applicant must certify that it is
qualified for the license and that it is in compliance with the foreign ownership provisions of
Section 310 of the Act. However, regarding its second request, we do not believe the foreign
ownership waiver provision in Section 332(c)(6) extends as far as Geotek argues. Section
332(c)(6) provides an opportunity for a limited waiver of Section 310(b) for private land mobile
radio service providers ("PLMRS") that now are reclassified as common carriers. Common
carrier licenses, including microwave licenses used to link base station facilities, always have
been subject to Section 310(b) and could not be considered grandfathered simply because the
licenses are used in conjunction with an SMR operation. In essence, Geotek's request to expand
its waiver to apply to common carrier services in which it did not hold a license prior to May 24,
1993, does not comport with the statute. However, we note that Geotek may file for a
declaratory ruling under Section 310(b)(4). While Geotek argues that existing precedent
supports its request to extend the Section 332(c)(6) waiver to common carrier licenses, it does
not cite any specific Commission precedent, and we believe that this is not the appropriate
proceeding in which to assess its request under Section 310(b)(4).
V. SEVENTH REPORT AND ORDER
A. Competitive Bidding Issues
1. Competitive Bidding Design
60. Background. We tentatively concluded in the Second R&O and Second Further
Notice that we would use simultaneous multiple round auctions for the 900 MHz SMR service.
We based our proposal on the factors established in the Competitive Bidding Second Report &
Order, for selecting from among auction methodologies to use for each particular auctionable
service. In that Order, we concluded that awarding licenses to those parties who value them
most highly would foster Congress's policy objectives. We noted there that since a bidder's
ability to introduce valuable new services and to deploy them quickly, intensively, and efficiently
increases the value of a license to that bidder, an auction design that awards licenses to those
bidders with the highest willingness to pay tends to promote the development and rapid
deployment of new services and the efficient and intensive use of the spectrum. We also stated
that: (l) licenses with strong value interdependencies should be auctioned simultaneously, and (2)
multiple round auctions generally will yield more efficient allocations of licenses and higher
revenues by providing bidders with information regarding other bidders' valuations of licenses,
especially where there is substantial uncertainty as to value. Thus, where the licenses to be
auctioned are interdependent and their value is expected to be high, simultaneous multiple round
auctions would best achieve the Commission's goals for competitive bidding.
61. We noted that, like PCS, the 900 MHz SMR licenses are interdependent, and
licensees are likely to aggregate and substitute across spectrum blocks and geographic regions.
Therefore, simultaneous multiple round bidding is likely to generate the most information about
license values during the course of the auction and facilitate efficient aggregation of licenses
across spectrum bands.
62. Comments. Most commenters agree with the Commission's proposal to use
simultaneous multiple round auctions for selecting among mutually exclusive 900 MHz SMR
applicants. According to AMTA, such a design is a means to facilitate spectrum aggregation in a
single geographic area, as well as to consolidate other regions. Nextel reasons that the
opportunity to purchase a block of channels in all 51 MTAs, or a combination thereof, is
essential to the ability of wide-area SMR operators to compete with other CMRS providers.
SCE agrees with the Commission's proposal, but suggests that the Commission provide the
broadest possible information to potential bidders about the incumbents occupying each block.
SCE, AMTA, and The Council of Independent Communications Suppliers ("CICS") suggest that
the Bidder Information Package provide the incumbent licensee's name, frequencies, block
numbers, geographic coordinates for each site, and a narrative site description including its
address, city, county, and state. Both SCE and AMTA maintain that, without such
information, the Commission may be inclined to award a license to overly enthusiastic bidders
who win a block without taking into consideration the location and number of incumbent
licensees, only to find that construction requirements cannot be met. According to CICS, a
small business will have an uphill battle to develop an incumbent block even if it does obtain
bidding credits. RAM, however, reiterates its opposition to auctioning of 900 MHz frequency
blocks on which there are existing operations, and contends that auctioning of licenses for those
areas is contrary to legislative intent, because RAM believes that Congress intended to allow
incumbent licensees to expand their systems without subjecting them to mutually exclusive
applications. Contrary to RAM's assertion, the Commission did not base its decision to auction
encumbered licenses solely or predominantly on the possibility of deriving auction revenues.
Prior to receiving auction authority, the Commission noted that its goal was to encourage the
growth of wide-area SMR service.
63. Discussion. Based on the record in this proceeding and our successful experience
conducting simultaneous multiple round auctions for narrowband and broadband PCS, we
believe a simultaneous multiple round auction design is the most appropriate for the 900 MHz
SMR service. First, for certain bidders, the value of these licenses will be significantly
interdependent because of the desirability of aggregation across geographic regions. Under these
circumstances, simultaneous multiple round bidding will generate more information about
license values during the course of the auction and provide bidders with more flexibility to
pursue back-up strategies, than if the licenses were auctioned separately. Simultaneous multiple
round bidding therefore is most likely to award licenses to the bidders who value them the most
highly and to provide bidders with the greatest likelihood of obtaining the license combinations
that best satisfy their service needs. Finally, we expect the value of these licenses to be
sufficiently high to warrant simultaneous multiple round bidding.
64. The Bidder Information Package will provide all the information about incumbent
licensees that is available in our licensing records.
65. RAM's argument that incumbent blocks should not be auctioned has been addressed
fully in the CMRS Third Report and Order and the Second R&O and Second Further Notice,
and RAM has not raised new arguments which would warrant reconsideration of our decision.
Since there are no alternative channels suitable for relocation, the Commission will require MTA
licensees to afford protection to incumbent SMR systems. These protections will protect
incumbent operators adequately without interfering with MTA licensees' operations.
2. License Grouping
66. Discussion. In the Second R&O and Second Further Notice, we tentatively
concluded that all 51 MTAs in the 900 MHz SMR band should be auctioned simultaneously.
We noted that, even if holding a single auction proves to be more costly than breaking the
licenses into groups, the added cost would be outweighed by the informational and bidding
flexibility advantages afforded by a single auction. We received no comments on this issue.
As the 1,020 licenses to be auctioned in this service all are for the same amount of spectrum and
will use a single service definition, we have determined that holding a single auction for all 51
MTAs in the 900 MHz SMR band will be the fairest, fastest, and most efficient means of
distributing these licenses.
B. Bidding Issues
1. Bidding Procedures
67. Bidders will be able to submit bids on-site, via personal computers using remote
bidding software, or via telephone. Given the space limitations for on-site bidding and the
uncertainty as to the exact number of prospective bidders, however, the Commission reserves the
right to have only remote bidding -- by personal computers and by telephone -- for the 900 MHz
SMR auction. The Commission will hold a seminar for prospective bidders to acquaint them
with this bidding design and all alternative bid submission methods.
68. Telephonic bidding, for example, is a simple and inexpensive method for bidders to
submit bids. When submitting bids by telephone, bidders may utilize the Internet to learn of the
round-by-round results of the auction. Online services such as CompuServe, Prodigy and
America Online provide Internet access at a reasonable cost. Bidders also may, at negligible
cost, use a computerized bulletin board service, accessible by telephone lines, from which
auction results can be downloaded to a personal computer.
2. Bid Increments and Tie Bids
69. Background. In the Second R&O and Second Further Notice, we proposed to
establish minimum bid increments for bidding in each round of the auction, as we have done in
previous multiple round auctions. The bid increment is the amount or percentage by which a
bid must be raised above the previous round's high bid in order to be accepted as valid in the
current bidding round. The application of a minimum bid increment speeds the auction process
and, along with activity and stopping rules, helps to ensure that the auction closes within a
reasonable period of time. Establishing an appropriate minimum bid increment is important in a
simultaneous auction with a simultaneous closing rule, because all markets remain open until
there is no bidding on any license and a delay in closing one market will delay the closing of all
markets.
70. Specifically, we proposed to start the 900 MHz auction with relatively large bid
increments, and to adjust the increments as bidding activity indicates. The minimum bid
increment in Stage I of the auction generally would be five percent of the high bid in the previous
round or $.02 per MHz-pop whichever is greater. In Stage II, we proposed to reduce the
minimum bid increment to the greater of five percent or $.01 per MHz-pop, and in Stage III, the
bid increment would remain at the greater of five percent or $.01 per MHz-pop. We proposed to
retain the discretion to vary the minimum bid increments for individual license or groups of
licenses at any time before or during the course of the auction, based on the number of bidders,
bidding activity, and the aggregate high bid amounts. We also proposed to retain the discretion
to keep an auction open if there is a round in which no bids or "proactive" waivers (i.e., waivers
submitted by the bidder, as explained at ¶¶ 85-87) are submitted.
71. Comments. Both AMTA and Nextel support the Commission's proposals to impose
bid increments. Pro Tec Communications, Inc. ("Pro Tec"), however, suggests that the
Commission's proposed bid increment system may work a hardship on incumbent licensees who
also are designated entities that plan to participate in the auction, because the proposed $0.02 per
MHz-pop may cause untenable jumps in bidding prices. Pro Tec explains that the value of
sparsely populated areas and a widely distributed population base, which represents that portion
not covered by Pro Tec's current service, is not equal to the per pop value of an urban, densely
populated market. Thus, Pro Tec suggests that the Commission reject the per pop system and
simply adopt the proposed five percent criterion.
72. Discussion. We will announce by Public Notice prior to the auction the general
guidelines for bid increments. The Commission retains the discretion to set and, by
announcement before or during the auction, vary the minimum bid increments for individual
licenses or groups of licenses over the course of the auction. Where a tie bid occurs, we will
determine the high bidder by the order in which the Commission receives the bids. We have
considered Pro Tec's argument that there will be differences in the per pop values of licenses
across MTAs and even for different blocks within the same MTA, depending on the status of
incumbents on the different blocks. To allow for the flexibility to deal with these differences, the
Commission retains the discretion to vary both absolute and percentage bid increments for
specific licenses. We do not believe that the possibility of value differences leads to the
conclusion that we should eliminate absolute bid increments, as this might unduly prolong the
auction.
3. Stopping Rules
73. Background. In multiple round auctions, a stopping rule must be established for
determining when the auction is over. In simultaneous multiple round auctions, bidding may
close separately on individual licenses, simultaneously on all licenses, or a hybrid approach may
be used. Under a license-by-license approach, bidding closes on each license after a certain
number of rounds pass in which no new acceptable bids are submitted for that particular license.
With a simultaneous stopping rule, bidding generally remains open on all licenses until there is
no new acceptable bid for any license. This approach provides bidders full flexibility to bid for
any license as more information becomes available during the course of the auction, but it may
lead to very long auctions unless an activity rule is imposed. Under a hybrid approach, we may
use a simultaneous stopping rule (along with an activity rule designed to expedite closure for
licenses subject to the simultaneous stopping rule) for the higher value licenses. For lower value
licenses, where the loss from eliminating some back-up strategies is less, we may use the license-by-license approach.
74. For 900 MHz SMR, we proposed to adopt a simultaneous stopping rule. We noted
that MTA licenses are expected to have relatively high values because of the substantial amount
of clear spectrum that remains available and the high valuation of SMR spectrum in secondary
market transactions. AMTA and Nextel support the Commission's proposal.
75. Discussion. We will adopt a simultaneous stopping rule for the 900 MHz SMR
auction. The substitutability between licenses within the same MTA, and the ability to pursue
back-up strategies support the use of a simultaneous stopping rule. Bidding will remain open on
all licenses in an auction until bidding stops on every license. The auction will close after one
round passes in which no new valid bids or proactive activity rule waivers (as defined in ¶¶ 85-86, infra) are submitted. We retain the discretion to keep an auction open even if no new
acceptable bids and no proactive waivers are submitted in a single round. In the event that we
exercise this discretion, the effect will be the same as if a bidder has submitted a proactive
waiver. We also retain the discretion to announce license-by-license closings.
76. We retain the discretion to declare after 40 rounds that the auction will end after
some specified number of additional rounds. We believe this number of rounds will assure that
the auction will not close prematurely, while providing bidders with fair assurance that the
auction will be conducted as intended. Bids will be accepted only on licenses where the high
bid has increased in the last three rounds. This will deter bidders from continuing to bid on a
few low value licenses solely to delay the closing of the auction. It also will enable the
Commission to end the auction when it determines that the benefits of terminating the auction
and issuing licenses exceed the likely benefits of continuing to allow bidding. The Commission
will announce by Public Notice the number of remaining rounds and other final bidding
procedures.
77. The disadvantage of declaring an imminent end to an auction, however, is that the
procedure may result in less efficient allocation of licenses than if the auction remained open as
long as new bids were received. Therefore, we will declare the imminent end of the auction
only in the case of extremely dilatory bidding, as we favor other methods to hasten the end of an
auction -- shortening the bidding rounds, raising the minimum bid increments, and proceeding to
a later auction stage. This will facilitate the rapid completion of the auction by permitting the
Commission to use larger bid increments, thereby speeding the auction pace without risking a
premature auction close.
4. Duration of Bidding Rounds
78. Background. We proposed in the Second R&O and Second Further Notice to reserve
the discretion to vary the duration of the bidding rounds or the interval at which bids are
accepted. AMTA and Nextel support the Commission's proposals.
79. Discussion. In simultaneous multiple round auctions, bidders may need a significant
amount of time to evaluate back-up strategies and develop their bidding plans. We delegate to
the Wireless Telecommunications Bureau the discretion to vary the duration of the bidding
rounds or the interval at which bids are accepted (e.g., run more than one round per day) in order
to move the auction toward closure more quickly. The Bureau will announce any changes to the
duration of and intervals between bidding rounds, either by Public Notice prior to the auction or
by announcement during the auction.
5. Activity Rules
80. Background. To ensure that simultaneous auctions with simultaneous stopping rules
close within a reasonable period of time and to increase the information conveyed by bid prices
during the auction, it is necessary to impose an activity rule to prevent bidders from waiting until
the end of the auction before participating. In the Competitive Bidding Second Report & Order,
we adopted the Milgrom-Wilson activity rule as our preferred activity rule where a simultaneous
stopping rule is used. The Milgrom-Wilson approach encourages bidders to participate in
early rounds by limiting their maximum participation to some multiple of their minimum
participation level. Bidders are required to declare their maximum eligibility in terms of MHz-pops, and to make an upfront payment proportional to that eligibility level. (See discussion of
upfront payments at ¶¶ 111-113, infra) In each round, bidders are limited to bidding on licenses
encompassing no more than the number of MHz-pops covered by their upfront payment.
Licenses on which a bidder is the high bidder at the end of the withdrawal period in the previous
round, as well as licenses on which a new valid bid is placed, count toward this bidding limit.
Under this approach, bidders have the flexibility to shift their bids among any license for which
they have applied so long as, within each round, the total MHz-pops encompassed by those
licenses does not exceed the total number of MHz-pops on which they are eligible to bid.
81. In the Second R&O and Second Further Notice, we tentatively concluded that the
Milgrom-Wilson activity rule should be used in conjunction with the proposed simultaneous
stopping rule to award 900 MHz SMR licenses. We noted that it would best achieve the
Commission's goals of affording bidders flexibility to pursue backup strategies, while at the same
time ensuring that simultaneous auctions are concluded within a reasonable period of time.
AMTA and Nextel support the Commission's proposals.
82. Discussion. We will employ the Milgrom-Wilson activity rule in conjunction with
the simultaneous stopping rule. Under the Milgrom-Wilson procedure, the minimum activity
level, measured as a fraction of the bidder's eligibility in the current round, increases during the
course of the auction. Absent waivers (discussed infra), a bidder's eligibility (in terms of MHz-pops) in the current round is determined by the bidder's activity level and eligibility in the
previous round. In the first round, however, eligibility is determined by the bidder's upfront
payment and is equal to the upfront payment divided by $.02 per MHz-pop.
83. In each round of Stage I, a bidder who wishes to maintain its current eligibility must
be active on licenses encompassing at least one-half of the MHz-pops for which it currently is
eligible. Failure to maintain the requisite activity level will result in a reduction in the amount of
MHz-pops upon which a bidder will be eligible to bid in the next round of bidding (unless an
activity rule waiver, as defined in ¶ 85, infra, is used). During Stage I, if bidding activity is
below the required minimum level, eligibility in the next round will be calculated by multiplying
the current round activity by two (2). Eligibility for each applicant in the first round of the
auction is determined by the amount of the upfront payment received and the licenses identified
in its auction application. In each round of Stage II, a bidder who wishes to maintain its current
eligibility is required to be active on at least 75 percent of the MHz-pops for which it is eligible
in the current round. During Stage II, if activity is below the required minimum level, eligibility
in the next round will be calculated by multiplying the current round activity by four thirds (4/3).
In each round of Stage III, a bidder who wishes to maintain its current eligibility must be active
on licenses encompassing at least 95 percent of the MHz-pops for which it is eligible in the
current round. In Stage III, if activity in the current round is below 95 percent of current
eligibility, eligibility in the next round will be calculated by multiplying the current round
activity by twenty nineteenths (20/19). We reserve the discretion to set and, by announcement
before or during the auction, vary the requisite minimum activity levels (and associated
eligibility calculations) for each auction stage. Retaining this flexibility will improve the
Commission's ability to control the pace of the auction and help ensure that the auction is
completed within a reasonable period of time.
84. As in prior auctions, we will determine the transition from one stage to the next in
the 900 MHz SMR auction by the aggregate level of bidding activity, subject to our discretion.
The transition rule also may be defined in terms of the "auction activity level" -- the sum of the
MHz-pops of those licenses whose high bid increased in the current round, as a percentage of the
total MHz-pops of all licenses in that auction. The auction will start in Stage I and move to
Stage II when the auction activity level is below ten percent for three consecutive rounds in Stage
I. The auction will move from Stage II to Stage III when the auction activity level is below five
percent for three consecutive rounds in Stage II. In no case can the auction revert to an earlier
stage. However, we retain the discretion to determine and announce during the course of an
auction when, and if, to move from one auction stage to the next. These determinations will be
based on a variety of measures of bidder activity including, but not limited to, the auction
activity level defined above, the percentage of licenses (measured in terms of MHz-pops) on
which there are new bids, the number of new bids, and the percentage increase in revenue.
85. To avoid the consequences of clerical errors and to compensate for unusual
circumstances that might delay a bidder's bid preparation or submission on a particular day, we
will provide bidders with five activity rule waivers that may be used in any round during the
course of the auction. If a bidder's activity level is below the required activity level a waiver
automatically will be applied. That is, if a bidder fails to submit a bid in a round, and its activity
level from any standing high bids (high bids at the end of the bid withdrawal period in the
previous round) falls below its required activity level, a waiver automatically will be applied. A
waiver will preserve current eligibility in the next round, but cannot be used to correct an error in
the amount bid. An activity rule waiver applies to an entire round of bidding and not to a
particular MTA service area.
86. Bidders will be afforded an opportunity to override the automatic waiver mechanism
when they place a bid, if they intentionally wish to reduce their bidding eligibility and do not
want to use a waiver to retain their eligibility at its current level. If a bidder overrides the
automatic waiver mechanism, its eligibility permanently will be reduced (according to the
formulas specified above), and it will not be permitted to regain its bidding eligibility from a
previous round. An automatic waiver invoked in a round in which there are no valid bids will
not keep the auction open. Bidders will have the option to proactively enter an activity rule
waiver during the bid submission period. Thus, a "proactive" waiver, as distinguished from an
automatic waiver, is one requested by the bidder. If a bidder submits a proactive waiver in a
round in which no other bidding activity occurs, the auction will remain open.
87. The Bureau retains the discretion to issue additional waivers during the course of an
auction for circumstances beyond a bidder's control. The Bureau also retains the flexibility to
adjust, by Public Notice prior to an auction, the number of waivers permitted, or to institute a
rule that allows one waiver during a specified number of bidding rounds or during specified
stages of the auction.
6. Rules Prohibiting Collusion
88. Background. In the Competitive Bidding Second Report & Order, we adopted a
special rule prohibiting collusive conduct in the context of competitive bidding. We observed
that such a rule would serve the objectives of the Budget Act by preventing parties, especially the
largest firms, from agreeing in advance to bidding strategies that divide the market according to
their strategic interests and disadvantage other bidders. In the Second R&O and Second
Further Notice, we tentatively concluded that Section 1.2105(c) of the Commission's Rules
would apply to 900 MHz SMR auctions. We also proposed that winning bidders in 900 MHz
SMR auctions be subject to Section 1.2107(d) of the Commission's Rules.
89. Comments. AMTA suggests that the Commission modify the collusion rules to
reflect the differences between Section 1.2107(d) and Section 1.2105(c). Specifically, AMTA
requests that the Commission clarify that consortia agreements entered into after the filing of the
Form 175 are permitted subject to the limitations set out in Section 1.2105(c)(2), which allows
modification of the short-form to reflect the formation of consortia, under certain
circumstances. RAM requests that the Commission clarify that providing information about
existing systems to potential new entrants in the 900 MHz SMR service does not constitute
collusion.
90. Discussion. We will subject 900 MHz SMR licensees to the reporting requirements
and rules prohibiting collusion embodied in Sections 1.2107(d) and 1.2105(c) of the
Commission's Rules. In response to AMTA's suggestion, we restate the collusion rules here.
Section 1.2107(d) provides that, as an exhibit to the long-form application, the applicant must
provide a detailed explanation of the terms and conditions and parties involved in any bidding
consortia, joint venture, partnership or other agreement or arrangement it had entered into
relating to the competitive bidding process prior to the time bidding was completed. The rule
provides that such agreements must have been entered into prior to the filing of the FCC Form
175. Section 1.2105(c), however, provides an exception to that prohibition for bidders who have
not filed Form 175 applications for licenses in any of the same geographic license areas.
Those bidders may enter into such discussions, consortia, or arrangements, or add equity
partners, after the filing of short-form applications. We also will permit communications
among bidders concerning matters unrelated to the license auctions, except for communications
resulting in a transfer of control of the applicant.
91. Section 1.2105(c)(4) also provides an exception for non-controlling parties holding
an attributable interest in multiple applicants for the same geographic license area. Such parties
may acquire an ownership interest in, form a consortium with, or enter into a joint bidding
arrangement with, other applicants for licenses in the same geographic license area, provided that
they have not communicated and will not communicate with any party concerning the bids or
bidding strategies of more than one of the applicants in which they hold attributable interests, or
with which they have a consortium or joint bidding arrangement, and which have applied for
licenses in the same geographic license area(s). The arrangements also must not result in any
change in control of an applicant.
92. In addition, as discussed at ¶¶ 104-105, infra, bidders will be required by Section
1.2105(a)(2) to identify on their Form 175 applications all parties with whom they have entered
into any consortium arrangements, joint ventures, partnerships or other agreements or
understandings which relate to the competitive bidding process. Bidders will be required to
certify that they have not entered and will not enter into any explicit or implicit agreements,
arrangements or understandings with any parties, other than those identified, regarding the
amount of their bid, bidding strategies or the particular properties on which they will or will not
bid.
93. We deny RAM's request to modify the collusion rule to exempt communications
between MTA bidders and incumbents. First, as we have stated, the Bidder Information Package
will contain information about the incumbent licensees. Any communications between MTA
bidders and incumbent licensees should take place prior to the deadline for filing Form 175s. We
see no reason to create a special exemption for this situation, particularly because the MTA
bidder and the incumbent licensee may be competing for the same MTA license.
94. We note that where specific instances of collusion in the competitive bidding process
are alleged during the petition to deny process, the Commission may conduct an investigation or
refer such complaints to the United States Department of Justice for investigation. Bidders who
are found to have violated the antitrust laws or the Commission's rules in connection with
participation in the auction process may be subject to penalties under antitrust laws, forfeiture of
their down payment or their full bid amount and revocation of their license(s), and they may be
prohibited from participating in future auctions.
C. Procedural and Payment Issues
1. Pre-auction Application Procedures
95. Background. In the Competitive Bidding Second Report & Order, the Commission
established general competitive bidding rules and procedures, which we noted may be modified
on a service-specific basis. In the Second R&O and Second Further Notice, we proposed to
follow generally the processing and procedural rules established in the Competitive Bidding
Second Report & Order, with certain modifications designed to address the particular
characteristics of the 900 MHz SMR service. AMTA generally agrees with our proposals.
Therefore, we will adopt such modified rules. These rules are structured to ensure that bidders
and licensees are qualified and will be able to construct systems quickly and offer service to the
public. By ensuring that bidders and license winners are serious, qualified applicants, these
proposed rules will minimize the need to re-auction licenses and prevent delays in the provision
of 900 MHz SMR service to the public.
96. As MTA licensees will gain use of a large geographic area and the freedom to locate
base stations anywhere within that larger geographic region, they differ from the existing 900
MHz licensees that essentially are confined to the smaller DFA region. Accordingly, we will
treat all MTA applicants as initial applicants for public notice, application processing, and
auction purposes, regardless of whether they are already incumbent operators.
97. Section 309(j)(5) provides that no party may participate in an auction "unless such
bidder submits such information and assurances as the Commission may require to demonstrate
that such bidder's application is acceptable for filing." Moreover, "[n]o license shall be granted
to an applicant selected pursuant to this subsection unless the Commission determines that the
applicant is qualified pursuant to Section 309(a), Section 308(b), and Section 310" of the
Communications Act. As the legislative history of Section 309(j) makes clear, the
Commission may require that bidders' applications contain all information and documentation
sufficient to demonstrate that the application is not in violation of Commission rules, and we will
dismiss applications not meeting those requirements prior to the competitive bidding.
98. In the Competitive Bidding Second Report & Order, we determined that we should
require only a short-form application (FCC Form 175) prior to competitive bidding, and that only
winning bidders should be required to submit a long-form license application (FCC Form 600)
after the auction. As we determined that such a procedure would fulfill the statutory
requirements and objectives and adequately protect the public interest, we incorporated these
requirements into the rules adopted in the Competitive Bidding Second Report & Order.
Accordingly, we will extend the application of these rules to the competitive bidding process for
900 MHz SMR.
99. Prior to the start of the 900 MHz SMR auction, the Wireless Telecommunications
Bureau will release an initial Public Notice announcing the auction. The initial Public Notice
will specify the licenses to be auctioned and the time and place of the auction in the event that
mutually exclusive applications are filed. The Public Notice will specify the method of
competitive bidding to be used, applicable bid submission procedures, stopping rules, activity
rules, and the deadline by which short-form applications must be filed and the amounts and
deadlines for submitting the upfront payment. We will not accept applications filed before or
after the dates specified in the Public Notice. Applications submitted before the release of the
Public Notice will be returned as premature. Likewise, applications submitted after the deadline
specified by Public Notice will be dismissed, with prejudice, as untimely.
100. Soon after the release of the initial Public Notice, a Bidder Information Package
will be made available to prospective bidders. As discussed at ¶ 64, supra, the bidders' package
will contain information on the incumbents occupying blocks on which bidding will be available.
101. All bidders will be required to submit short-form applications on FCC Form 175
(and FCC Form 175-S, if applicable), by the date specified in the initial Public Notice.
Applicants are encouraged to file Form 175 electronically. Detailed instructions regarding
electronic filing will be contained in the Bidder Information Package. Those applicants filing
manually will be required to submit one paper original and one diskette original of their
application, as well as two diskette copies. The short-form applications will require applicants to
provide the information required by Section 1.2105(a)(2) of the Commission's Rules.
Specifically, each applicant will be required to specify on its Form 175 applications certain
identifying information, including its status as a designated entity (if applicable), its
classification (i.e., individual, corporation, partnership, trust, or other), the MTAs and frequency
blocks for which it is applying, and, assuming that the licenses will be auctioned, the names of
persons authorized to place or withdraw a bid on its behalf.
102. As we indicated in the Competitive Bidding Second Report & Order, if we receive
only one application that is acceptable for filing for a particular license, and thus there is no
mutual exclusivity, we will issue a Public Notice cancelling the auction for this license and
establishing a date for the filing of a long-form application, the acceptance of which will trigger
the procedures permitting petitions to deny (as discussed at ¶ 127, infra). If no petitions to
deny are filed, the application will be grantable after 30 days.
2. Amendments and Modifications
103. Background. To encourage maximum bidder participation, we proposed in the
Second R&O and Second Further Notice to provide applicants with an opportunity to correct
minor defects in their short-form applications prior to the auction. We received no comments
on this proposal.
104. Discussion. On the date set for submission of corrected applications, applicants that
on their own discover minor errors in their applications (e.g., typographical errors, incorrect
license designations, etc.) will be permitted to file corrected applications. We also will waive the
ex parte rules as they apply to the submission of amended short-form applications for the 900
MHz SMR auctions, to maximize applicants' opportunities to seek Commission staff advice on
making such amendments. Applicants will not be permitted to make any major modifications
to their applications, including, but not limited to, changes in license areas and changes in control
of the applicant, or additions of other bidders into the bidding consortia, until after the auction.
Applicants may modify their short-form applications to reflect formation of consortia or changes
in ownership at any time before or during an auction, provided such changes will not result in a
change in control of the applicant, and provided that the parties forming consortia or entering
into ownership agreements have not applied for licenses in any of the same geographic license
areas. In addition, applications that are not signed will be dismissed as unacceptable, as will
applications in which no market designations are made.
105. In addition, a single member of a bidding consortium may withdraw from a
consortia only in a particular MTA(s), but otherwise remain in the consortium for purposes of
bidding on all other markets specified on the short-form application. However, such
arrangements to assign the member's interests in particular licenses to other consortium members
after the auction must be disclosed on an original or amended short-form application, and a
request to transfer or assign the license also must be filed in conjunction with the long-form
application.
106. Upon reviewing the short-form applications, we will issue a Public Notice listing all
defective applications, and applicants with minor defects will be given an opportunity to cure and
resubmit a corrected version. By the resubmission date, all applicants will be required to submit
an upfront payment to the Commission, as discussed below, to the Commission's lock-box by the
date specified in the Public Notice, which generally will be no later than 14 days before the
scheduled auction. After the Commission receives from its lock-box bank the names of all
applicants who have submitted timely upfront payments, the Commission will issue a second
Public Notice announcing the names of all applicants that have been determined as qualified to
bid. An applicant who fails to submit a sufficient upfront payment to qualify it to bid on any
license being auctioned will not be identified on this Public Notice as a qualified bidder. Each
applicant listed on this Public Notice will be issued a bidder identification number and further
information and instructions regarding auction procedures.
3. Upfront Payments
107. Background. In the Competitive Bidding Second Report & Order, we concluded
that a substantial upfront payment prior to the beginning of an auction is necessary to ensure that
only serious and qualified bidders participate. By requiring such a payment, we also help to
ensure that any bid withdrawal or default assessments are paid. We tentatively concluded to use
the standard upfront payment formula of $0.02 per MHz-pop, based on the number of 10-channel
blocks in each MTA identified by an applicant on its Form 175, and to allow bidders to bid on
any combination of licenses, as long as the total MHz-pops combination would not exceed the
amount covered by the upfront payment.
108. Comments. Four commenters addressed the Commission's proposal to require an
upfront payment equal to $0.02 per MHz-pop. RAM supports the Commission's proposal.
Geotek does not support the Commission's proposal, reasoning that such a formula, as opposed
to a per-license upfront payment, may encourage bidders to bid in every block, including
encumbered blocks in which they have no particular interest. Nextel contends that an upfront
payment of $0.02 per MHz-pop may be insufficient to discourage insincere bidders, because the
capital outlay is significantly different from PCS. CICS disagrees with Nextel, stating that the
nature of the auction process will deter speculators and that, in any event, the imposition of strict
penalties is a better safeguard.
109. Both Geotek and RAM urge the Commission to require upfront payments for each
frequency block for which an applicant designates an interest on its FCC Form 175, and that
bidding eligibility should be limited to those designated blocks. RAM disagrees with the
Commission's proposal to allow bidding on any combination of licenses for which the total
MHz-pop does not exceed the amount covered by the upfront payment, because a single upfront
payment should not make a bidder eligible for multiple licenses. RAM comments that to do
otherwise would not follow the congressional directive to avoid mutual exclusivity.
110. Discussion. We reject both Geotek's and RAM's arguments that we should limit a
bidder's eligibility to the specific blocks designated on the applicant's Form 175, or that we
should adopt a per-license upfront payment. The simultaneous multiple round auction design
combined with the standard bid withdrawal payments is designed to allow bidders to have
flexibility to substitute bidding on various licenses during the course of the auction. The
flexibility to respond to information during the course of the auction is one of the major
beneficial features of the auction. If we were to adopt the Geotek/RAM limitation, this
flexibility would be lost. For example, bidders can change their strategy during an auction and
bid on a larger number of smaller licenses (i.e., MTAs with fewer pops), or a smaller number of
larger licenses, so long as the total MHz-pops combination does not exceed the amount covered
by the upfront payment. Bidders would be forced to bid on more licenses than they ultimately
wish to obtain under the Geotek/RAM proposal. They would be forced to risk an amount that
would have little correspondence with the value of the licenses ultimately won. We believe that
preserving the bidder's flexibility outweighs the small amount of speculation that might be
deterred with a stricter rule, particularly in light of the deterrent effect of the bid withdrawal
payment (as discussed at ¶¶ 120-122, infra).
111. We will adopt the standard $0.02 per Mhz-pop formula to calculate the upfront
payment. We disagree with Nextel that the $0.02 per MHz-pop formula is too insignificant to
deter speculation in the 900 MHz SMR service. The upfront payment for PCS was calculated to
be approximately five percent of the final price to approximate one bid increment. In both the
narrowband and broadband PCS auctions, in which we used the $0.02 per MHz-pop upfront
payment, all bid withdrawal payments were paid in full and all winning bidders have paid all
amounts due. Thus, our experience demonstrates that the upfront payment will be sufficient to
deter speculation in this auction as well.
112. In the initial Public Notice issued prior to the auction, we will announce population
information corresponding to each license and the upfront payment amount for each MTA
license. In general, population coverage for each channel block in each MTA will be based on a
formula that takes into account the presence of incumbent licensees.
113. Upfront payments will be due by a date specified by Public Notice, but generally no
later than 14 days before a scheduled auction. Each qualified bidder will be issued a bidder
identification number and further information and instructions regarding the auction procedures.
During the auction, bidders will be required to provide their bidder identification numbers when
submitting bids.
4. Down Payment and Full Payment
114. Background. In the Competitive Bidding Second Report & Order, we established a
20 percent down payment requirement for winning bidders to discourage default between the
auction and licensing, and to ensure payment of the default assessment if such default occurs.
We concluded that a 20 percent down payment was appropriate to ensure that auction winners
have the necessary financial capabilities to complete payment for the license and to pay for the
costs of constructing a system, while not being so onerous as to hinder growth or diminish
access. We also determined that this amount was appropriate for the broadband PCS
auctions. Using the same reasoning in the Second R&O and Second Further Notice, we
tentatively concluded that, with the exception of designated entities eligible for installment
payments, winning bidders in 900 MHz SMR auctions would have to supplement their upfront
payments with a down payment sufficient to bring their total deposits up to 20 percent of their
winning bid(s). AMTA generally supports this proposal.
115. Discussion. With the exception of designated entities eligible for installment
payments (as discussed at ¶¶ 169-170, infra), winning bidders must supplement their upfront
payments with a down payment sufficient to bring their total deposits up to 20 percent of their
winning bid(s). If the upfront payment already tendered by a winning bidder, after deducting any
bid withdrawal and default payments due, amounts to 20 percent or more of its winning bids, no
additional deposit will be required. If the upfront payment amount on deposit is greater than 20
percent of the winning bid amount after deducting any bid withdrawal and default payments due,
the additional monies will be refunded. If a bidder has withdrawn a bid or defaulted but the
amount of the payment cannot yet be determined, the bidder will be required to make a deposit of
20 percent of the amount bid on such licenses. When it becomes possible to calculate and assess
the payment, any excess deposit will be refunded. Upfront payments will be applied to such
deposits, and to bid withdrawal and default assessments due, before being applied toward the
bidder's down payment on licenses the bidder has won and seeks to acquire.
116. Winning bidders must submit the required down payment by cashier's check or wire
transfer to our lock-box bank by a date and time to be specified by Public Notice, generally
within five business days following the close of bidding. All auction winners generally will be
required to make full payment of the balance of their winning bids within five (5) business days
following Public Notice that the Commission is prepared to award the license. The Commission
generally will grant uncontested licenses within ten (10) business days after receiving full
payment.
117. We also will subject an auction winner that is eligible to make payments through an
installment plan (i.e., designated entities, as discussed at ¶¶ 152-156, infra) to different payment
requirements. Such an entity will be required to bring its deposit with the Commission up to five
percent of its winning bid after the bidding closes, and will have to pay an additional five percent
of its winning bid to the Commission within five (5) business days following Public Notice that
the Commission is prepared to award the license. The Commission then will grant the license
generally within ten (10) business days after receiving the five percent payment.
5. Bid Withdrawal, Default, and Disqualification
118. Background. We determined in the Competitive Bidding Second Report & Order
that there must be a substantial payment assessed to bidders if they withdraw a high bid, are
found not to be qualified to hold licenses, or default on payment of a balance due. Although we
concluded that payment of all amounts that a bidder has on deposit may be too severe in many
cases, we devised alternative disincentives for withdrawal, default, or disqualification. In the
Second R&O and Second Further Notice, we tentatively concluded that these procedures, found
in Sections 1.2104(g) and 1.2109 of the Commission's Rules, would be appropriate for the 900
MHz SMR auction as well. Accordingly, we proposed that any bidder that withdraws a high
bid during an auction before the Commission declares bidding closed will be required to
reimburse the Commission in the amount of the difference between its high bid and the amount
of the winning bid the next time the license is offered by the Commission, if this subsequent
winning bid is lower than the withdrawn bid.
119. Comments. The only commenter on this issue, Nextel, favors stricter payments on
bid withdrawal. Nextel maintains that the Commission should impose forfeiture of the upfront
payment for withdrawal of a high bid, due to the high potential for abuse in the 900 MHz SMR
auctions. Nextel, however, fails to explain why the 900 MHz SMR auction would be
especially prone to abuse.
120. Discussion. We disagree with Nextel's recommendation, because we believe that
forfeiture of the entire upfront payment is too draconian for the bidder who withdraws only one
bid. Since commenters have not stated why the 900 MHz SMR service differs in this respect
from the narrowband and broadband PCS services, there is no justification for departing from the
already tested narrowband and broadband PCS withdrawal, default, and disqualification
assessments. Therefore, we believe our proposal to apply Section 1.2104(g)(1) to the 900 MHz
SMR auction is more equitable and is consistent with our practice in prior auctions. Section
1.2104(g)(1) provides that any bidder that withdraws a high bid during an auction before the
Commission declares bidding closed will be required to reimburse the Commission in the
amount of the difference between its high bid and the amount of the winning bid the next time
the license is offered by the Commission, if this subsequent winning bid is lower than the
withdrawn bid.
121. If a license is re-offered by auction, the "winning bid" refers to the high bid in the
auction in which the license is re-offered. If a license is re-offered in the same auction, the
winning bid refers to the high bid amount, made subsequent to the withdrawal, in that auction. If
the subsequent high bidder also withdraws its bid, that bidder will be required to pay an
assessment equal to the difference between its withdrawn bid and the amount of the subsequent
winning bid the next time the license is offered by the Commission. If a license which is the
subject of withdrawal or default is not re-auctioned, but instead is offered to the highest losing
bidders in the initial auction, the "winning bid" refers to the bid of the highest bidder who accepts
the offer. Losing bidders will not be required to accept the offer, i.e., they may decline without
penalty. We wish to encourage losing bidders in simultaneous multiple round auctions to bid on
other licenses, and therefore we will not hold them to their losing bids on a license for which a
bidder has withdrawn a bid or on which a bidder has defaulted.
122. After bidding closes, we will apply Section 1.2104(g)(2) to assess a defaulting
auction winner an additional payment of three percent of the subsequent winning bid or three
percent of the amount of the defaulting bid, whichever is less. The additional three percent
payment is designed to encourage bidders who wish to withdraw their bids to do so before
bidding ceases. We will hold deposits made by defaulting or disqualified auction winners until
full payment is made.
123. These payment requirements will discourage default and ensure that bidders meet
all eligibility and qualification requirements. If a default or disqualification involves gross
misconduct, misrepresentation or bad faith by an applicant, the Commission may declare the
applicant and its principals ineligible to bid in future auctions, and may take any other action that
it deems necessary, including institution of proceedings to revoke any existing licenses held by
the applicant.
124. If the MTA winner defaults, is otherwise disqualified after having made the
required down payment, or the license is terminated or revoked, then the Commission will re-auction the license. If the default occurs within five business days after the bidding has closed,
the Commission retains the discretion to offer the license to the second highest bidder at its final
bid level, or if that bidder declines the offer, to offer the license to other bidders (in descending
order of their bid amounts) at the final bid levels. If only a short time has passed since the initial
auction, the Commission may choose to offer the license to the highest losing bidders if the cost
of running another auction exceeds the benefits.
6. Long-Form Applications
125. Discussion. We proposed in the Second R&O and Second Further Notice to apply
the general procedures for filing long-form applications to the 900 MHz SMR auctions. We
received no comments on this proposal. Therefore, we will follow these procedures if the
winning bidder makes the down payment in a timely manner: A long-form application filed on
FCC Form 600 must be filed by a date specified by Public Notice, generally within ten business
days after the close of bidding. After the Commission receives the winning bidder's down
payment and long-form application, we will review the long-form application to determine if it is
acceptable for filing. In addition to the information required in the Form 600, designated entities
will be required to submit evidence to support their claim to any special provision available for
designated entities described in this Order. This information may be included in an exhibit to
FCC Form 600. This information will enable the Commission, and other interested parties, to
ensure the validity of the applicant's certification of eligibility for bidding credits, installment
payment options, and other special provisions. Upon acceptance for filing of the long-form
application, the Commission will issue a Public Notice announcing this fact, triggering the filing
window for petitions to deny. If the Commission denies all petitions to deny, and is otherwise
satisfied that the applicant is qualified, the license(s) will be granted to the auction winner.
7. Petitions to Deny and Limitations on Settlements
126. Discussion. We determined in the CMRS Third Report & Order that the petition to
deny procedures in Section 90.163 of the Commission's Rules will apply to the processing of
applications for the 900 MHz SMR service. Although we did not request comment on this
issue, AMTA expressed its support for the Commission's adoption of a limitation on
settlements. AMTA expresses its concern that, due to the small size of the spectrum blocks
that will be auctioned in 900 MHz and the presence of incumbents, the auctions offer an
opportunity to "greenmail" current licensees. A party filing a petition to deny against a 900
MHz SMR application will be required to demonstrate standing and meet all other applicable
filing requirements. The "greenmail" restrictions in Section 90.162 were established to prevent
the filing of speculative applications and pleadings (or threats of the same) designed to extract
money from 900 MHz SMR applicants. Thus, we will limit the consideration that an applicant
or petitioner is permitted to receive for agreeing to withdraw an application or a petition to deny
to the legitimate and prudent expenses of the withdrawing applicant or petitioner.
127. With respect to petitions to deny, the Commission need not conduct a hearing
before denying an application if it determines that an applicant is not qualified and no substantial
issue of fact exists concerning that determination. In the event the Commission identifies
substantial and material issues of fact, Section 309(i)(2) of the Communications Act permits the
submission of all or part of evidence in written form in any hearing and allows employees other
than administrative law judges to preside over the taking of written evidence.
8. Transfer Disclosure Requirement
128. Background. In Section 309(j), Congress directed the Commission to "require such
transfer disclosures and anti-trafficking restrictions and payment schedules as may be necessary
to prevent unjust enrichment as a result of the methods employed to issue licenses and
permits." In the Competitive Bidding Second Report & Order, the Commission adopted
safeguards designed to ensure that the requirements of Section 309(j)(4)(E) are satisfied. We
decided that it was important to monitor transfers of licenses awarded by competitive bidding to
accumulate the necessary data to evaluate our auction designs and to judge whether "licenses
[have been] issued for bids that fall short of the true market value of the license." Therefore,
we imposed a transfer disclosure requirement on licenses obtained through the competitive
bidding process, whether by a designated entity or not. We tentatively concluded in the
Second R&O and Second Further Notice that the transfer disclosure requirements of Section
1.2111(a) should apply to all 900 MHz SMR licenses obtained through the competitive bidding
process.
129. Discussion. We received no comments on this proposal. Therefore, we will apply
Section 1.2111(a) to all 900 MHz SMR licenses obtained through the competitive bidding
process. Generally, licensees transferring their licenses within three years after the initial license
grant will be required to file, together with their transfer applications, the associated contracts for
sale, option agreements, management agreements, and all other documents disclosing the total
consideration received in return for the transfer of its license. As we indicated in the Second
R&O and Second Further Notice, we will give particular scrutiny to auction winners who have
not yet begun commercial service and who seek approval for a transfer of control or assignment
of their licenses within three years after the initial license grant, so that we may determine if any
unforeseen problems relating to unjust enrichment have arisen outside the designated entity
context.
9. Performance Requirements
130. Discussion. The Communications Act requires the Commission to "include
performance requirements, such as appropriate deadlines and penalties for performance failures,
to ensure prompt delivery of service to rural areas, to prevent stockpiling or warehousing of
spectrum by licensees or permittees, and to promote investment in and rapid deployment of new
technologies and services." In the Competitive Bidding Second Report & Order, we decided it
was unnecessary and undesirable to impose additional performance requirements, beyond those
already provided in the service rules, for all auctionable services. In the Second R&O and
Second Further Notice, we tentatively concluded that the coverage requirements that we adopted
there would be sufficient to address the spectrum warehousing concern. We received no
comment on this issue. Therefore, we will not adopt any performance requirements for the 900
MHz SMR service beyond that required by Section 90.665. Because the failure to meet those
coverage requirements will result in automatic cancellation of license, we believe that is
sufficient incentive to promote prompt service and prevent spectrum warehousing.
D. Treatment of Designated Entities
1. Overview, Objectives, and the Impact of Adarand Constructors v. Peña
131. Background. The Communications Act provides that, in developing competitive
bidding procedures, the Commission shall consider various statutory objectives and consider
several alternative methods for achieving them. Specifically, the statute provides that in
establishing eligibility criteria and bidding methodologies the Commission shall "promot[e]
economic opportunity and competition and ensur[e] that new and innovative technologies are
readily accessible to the American people by avoiding excessive concentration of licenses and by
disseminating licenses among a wide variety of applicants, including small businesses, rural
telephone companies, and businesses owned by members of minority groups and women."
Small businesses, rural telephone companies and businesses owned by minorities and/or women
are collectively referred to as "designated entities." Section 309(j)(4)(A) provides that to
promote the statute's objectives the Commission shall "consider alternative payment schedules
and methods of calculation, including lump sums or guaranteed installment payments, with or
without royalty payments, or other schedules or methods . . . and combinations of such
schedules and methods." The statute also requires the Commission to "ensure that small
businesses, rural telephone companies, and businesses owned by members of minority groups
and women are given the opportunity to participate in the provision of spectrum-based
services."
132. In instructing the Commission to ensure the opportunity for designated entities to
participate in auctions and spectrum-based services, Congress was well aware of the problems
that designated entities would have in competing against large, well-capitalized companies in
auctions and the difficulties they encounter in accessing capital. For example, the legislative
history accompanying our grant of auction authority states generally that the Commission's
regulations "must promote economic opportunity and competition," and "[t]he Commission will
realize these goals by avoiding excessive concentration of licenses and by disseminating licenses
among a wide variety of applicants, including small businesses and businesses owned by
members of minority groups and women." The House Report states that the House Budget
Committee was concerned that, "unless the Commission is sensitive to the need to maintain
opportunities for small businesses, competitive bidding could result in a significant increase in
concentration in the telecommunications industries." More specifically, the House Budget
Committee was concerned that adoption of competitive bidding should not have the effect of
"excluding" small businesses from the Commission's licensing procedures, and anticipated that
the Commission would adopt regulations to ensure that small businesses would "continue to have
opportunities to become licensees."
133. Consistent with Congress's concern that auctions not operate to exclude small
businesses, the provisions relating to installment payments clearly were intended to assist small
businesses. The House Report states that these related provisions were drafted to "ensure that all
small businesses will be covered by the Commission's regulations, including those owned by
members of minority groups and women." It also states that the provisions in Section
309(j)(4)(A) relating to installment payments were intended to promote economic opportunity by
ensuring that competitive bidding does not inadvertently favor incumbents with "deep pockets"
"over new companies or start-ups."
134. In addition, with regard to access to capital, Congress had made specific findings in
the Small Business Credit and Business Opportunity Enhancement Act of 1992, that "small
business concerns, which represent higher degrees of risk in financial markets than do large
businesses, are experiencing increased difficulties in obtaining credit." As a result of these
difficulties, Congress resolved to consider carefully legislation and regulations "to ensure that
small business concerns are not negatively impacted" and to give priority to passage of
"legislation and regulations that enhance the viability of small business concerns."
135. In our initial implementation of Section 309(j) of the Communications Act, we
established in the Competitive Bidding Second Report & Order eligibility criteria and general
rules that would govern the special measures for designated entities. We also identified
several measures, including installment payments, spectrum set-asides, and bidding credits, from
which we could choose in establishing rules for auctionable spectrum-based services. We stated
that we would decide whether and how to use these special provisions, or others, when we
developed specific competitive bidding rules for particular services. In addition, we set forth
rules designed to prevent unjust enrichment by designated entities who transfer ownership in
licenses obtained through the use of these special measures or who otherwise lose their
designated entity status.
136. We have employed a wide range of special provisions and eligibility criteria
designed to meet the statutory objectives of providing opportunities to designated entities in
other spectrum-based services. The measures adopted thus far for each service were
established after closely examining the specific characteristics of the service and determining
whether any particular barriers to accessing capital stood in the way of designated entity
opportunities. After examining the record in the competitive bidding proceeding in PP Docket
93-253, we established provisions that sought to enable designated entities to overcome the
barriers to accessing capital in each particular service. Moreover, the measures we adopted also
were designed to increase the likelihood that designated entities who win licenses in the auctions
become strong competitors in the provision of wireless services.
137. Impact of Adarand Constructors, Inc. v. Peña. In the broadband PCS docket, we
determined that, on separate entrepreneurs' blocks, the bidding credits would vary according to
the type of qualifying designated entity that applied (i.e., a small business would receive a 10
percent bidding credit, a business owned by minorities or women would receive a 15 percent
bidding credit, and a small business owned by women or minorities would receive an aggregated
bidding credit of 25 percent), and all entrepreneurs' block licensees would be eligible for
varying degrees of installment payments. The Commission adopted special provisions for
businesses owned by members of minority groups or women and analyzed their constitutionality
using the "intermediate scrutiny" standard of review articulated in Metro Broadcasting v. FCC,
because, as in Metro, the proposed provisions involved Congressionally-mandated benign race-
and gender-conscious measures.
138. After the release of the broadband PCS rules, the Supreme Court decided Adarand
Constructors v. Peña, which overruled Metro Broadcasting "to the extent that Metro
Broadcasting is inconsistent with" the holding in Adarand that "all racial classifications . . . must
be analyzed by a reviewing court under strict scrutiny. As a result of the Adarand decision, the
constitutionality of any federal program that makes distinctions on the basis of race must serve a
compelling governmental interest and must be narrowly tailored to serve that interest. Upon
further notice, the Commission modified the designated entities provisions in the "C" Block
auction so as to render them race- and gender-neutral, because of the potential and substantial
delay that would be incurred in supplementing the record to meet a "strict scrutiny" standard,
and to avoid the substantial likelihood that the auction would be stayed based on the holding in
Adarand.
139. In the 900 MHz SMR service, as in other auctionable services, we remain
committed to meeting the statutory objectives of promoting economic opportunity and
competition, of avoiding excessive concentration of licenses, and of ensuring access to new and
innovative technologies by disseminating licenses among a wide variety of applicants, including
small businesses, rural telephone companies, and businesses owned by members of minority
groups and women. Accordingly, in balancing the objectives set forth in the statute, we
tentatively concluded that bidding credits, reduced down payments and installment payments
should be made available to all small businesses -- including those owned by minorities and
women and small rural telephone companies -- on all 900 MHz SMR channel blocks in each
MTA. In addition, to facilitate the introduction of service to rural areas, we proposed to allow
rural telephone companies to obtain geographically partitioned 900 MHz SMR licenses in areas
where they provide telephone service, similar to the program adopted in broadband PCS.
140. The Second R&O and Second Further Notice in this docket was released two
months before the Supreme Court's decision in Adarand. Consequently, we issued a Public
Notice requesting further comment on the effect of the Adarand decision on the proposals made
in the Second R&O and Second Further Notice in order to supplement our record in the 900
MHz SMR proceeding. We received three comments in response to the Public Notice. All
three commenters, AMTA, Geotek, and RAM, agree with the Commission's proposal not to
adopt separate provisions for minority-owned and women-owned entities that are not small
businesses. AMTA submits that the financial barriers which have provided a basis for race- and
gender-specific programs in other more capital-intensive services are not present in the 900 MHz
SMR service and that the service lacks a history of licensing discrimination. Geotek asserts
that there is no history of discrimination in 900 MHz SMR, and that Section 309(j) does not
justify separate classifications for minority-owned and women-owned businesses in the 900 MHz
SMR service. RAM contends that the Commission's gender-neutral and race-neutral proposals
serve as adequate incentive to diversified participation in the 900 MHz SMR service. All three
commenters express their belief that the goals of Section 309(j) will be served by the
Commission's original proposal to extend benefits only to small businesses, the definition of
which will, they believe, include significant numbers of minority-owned and women-owned
entities within its purview. Based on the record in this proceeding which establishes 900 MHz
SMR service's comparatively lower capital costs than PCS, we intend to adopt bidding credits,
installment payments, and reduced down payments for small businesses that meet the
Commission's small business definitions, as discussed in ¶¶ 152-156, and will not adopt separate
provisions for minority-owned and women-owned entities. As there will be small businesses
with variable abilities to access capital, we will tier the bidding credits to account for these
differences. We believe these provisions will meet Congress's goal of promoting wide
dissemination of wireless licenses. Detailed discussion regarding each aspect of this decision
follow.
2. Eligibility for Bidding Credits, Installment Payments and Reduced Down
Payments
141. Background. In the Second R&O and Second Further Notice, we proposed to limit
eligibility for bidding credits, installment payments and reduced down payments to small
businesses, including those owned by members of minority groups and women and those rural
telephone companies that meet our small business size standards. We proposed to define small
businesses as those entities with less than $3 million in average gross revenues for the preceding
three years, based in part on data provided by AMTA. We stated our belief that providing
credits on all blocks and lowering the gross revenue threshold for small businesses would create
more opportunities for minorities and women. To enhance our understanding of the capital
requirements the 900 MHz SMR service, however, we sought comment on the projected costs
associated with acquisition, construction and operation of 900 MHz MTA licenses; the
composition of existing 900 MHz SMR providers in terms of women and minority ownership; to
what extent participants in 900 MHz SMR networks have been small businesses owned by
minorities and women; and the likelihood that management agreements are likely to serve as a
vehicle for participation in the 900 MHz SMR service by minority and women-owned
businesses.
142. In the Competitive Bidding Second Memorandum Opinion & Order, we stated that
we would define eligibility requirements for small businesses on a service-specific basis, taking
into account the capital requirements and other characteristics of each particular service in
establishing the appropriate threshold. With respect to eligibility in the 900 MHz auction for
provisions available to small businesses, we stated that, because the 900 MHz SMR service is
expected to be less capital-intensive than broadband PCS and regional narrowband PCS, in
which we adopted a $40 million threshold, and it encompasses a smaller amount of spectrum
than PCS and less area than regional narrowband PCS, a much lower gross revenue threshold
would be warranted. Therefore, we proposed to define a small business as an entity that, together
with affiliates and attributable investors, has average gross revenues for the three preceding years
of less than $3 million.
143. With respect to the proposed small business definition, we sought comment on
whether the $3 million definition was an appropriate threshold; and whether it should be higher
or lower, based on the types of companies that are likely to benefit from the special provisions
offered. We also tentatively concluded that we would consider the revenues of affiliates and
certain investors, and we proposed to apply the 25 percent attribution threshold and affiliation
rules similar to those used in the PCS auction rules. We sought comment on whether the 900
MHz SMR service warranted a different attribution threshold.
144. We also sought comment on whether, in the event we were to adopt separate
provisions for minority-owned and women-owned entities, we should use the definition of
minority-owned businesses and women-owned businesses contained in Section 1.2110(b)(2) of
the Commission's rules, i.e., businesses in which minorities and/or women control the applicant,
have at least 50.1 percent equity ownership and, in the case of a corporate applicant, a 50.1
percent voting interest. Under this rule, every general partner in a partnership either must be a
minority and/or woman who individually or together own at least 50.1 percent of the partnership
equity.
145. Comments. AMTA, Nextel, RAM, Celsmer and Motorola favor the Commission's
proposal to limit eligibility for bidding credits to small businesses, while AMTA, RAM,
Celsmer and Motorola also favor reduced down payments and installment payments to small
businesses. The combination of bidding credits, reduced down payments and installment
payments, as well as the relatively small capital outlay required for entry into the 900 MHz SMR
service, were found by commenters to increase the likelihood that women and minority-owned
businesses would be able to participate. Motorola supports its conclusion with data purporting
to show that the capital outlay needed to start up and build out a 900 MHz SMR system will be
significantly less than that for either narrowband or broadband PCS. Specifically, Motorola
estimates that a system adequate to provide service throughout an entire MTA should cost less
than $2 million, as compared with build-out costs for nationwide narrowband and broadband
PCS, anticipated to exceed hundreds of millions of dollars. AMTA agrees that economic
barriers to minority entry into 900 MHz SMR service are extremely small in comparison to other
telecommunications services, and that the industry has more diversified licensees than many
other telecommunications services, making specific remedies unnecessary. Celsmer comments
that 900 MHz SMR is not as cost-prohibitive as cellular or PCS, eliminating the need for
additional enhancements for minority-owned and women-owned businesses. Motorola and
RAM suggest that the use of enhanced benefits for women-owned and minority-owned entities
may well result in a constitutional challenge, which would delay the auction, and that the
Commission's proposals in the Second Further Notice clearly are constitutional. Nextel
comments that the Commission's proposal not to set aside a specific block for designated entity
bidding serves the public interest in light of the presence of incumbents. In their response to
our Adarand Public Notice, AMTA, RAM and Geotek expressed support for the Commission's
decision to limit eligibility to small businesses.
146. On the other hand, in comments filed before the Supreme Court's Adarand decision,
the National Association of Black Owned Broadcasters ("NABOB") and the Minority Business
Enterprise Legal and Defense Education Fund, Inc. ("MBELDEF") disagree with the
Commission's proposal to limit eligibility to small businesses. NABOB contends that the
Commission would not be complying with Section 309(j) of the Act unless it specifically
includes rules that promote economic opportunities for minorities. NABOB urges the
Commission to rely on a 1995 National Telecommunications and Information Administration
("NTIA") study that shows a decline in African-American owned telecommunications companies
over the last three years, to justify promotion of minority business opportunities. NABOB
contends that the Commission is not complying with Section 309(j) because, while 99 percent of
all minority businesses may fall under our proposed definition, 99 percent of all small businesses
are not minority-owned. NABOB proposes a 25 percent bidding credit for all minority-owned
businesses having up to $125 million in gross revenue and limiting eligibility to 20 percent of the
channels to minority-owned companies. MBELDEF contends that the Commission's
proposals do not provide enough benefit to minorities, and that the Commission will not be able
to monitor the benefits of its programs for minorities. MBELDEF expresses concern that
without race-specific benefits, the benefits of any race-neutral provisions will be diluted.
147. Although we did not request comment on the issue of incumbent licensees who
meet the designated entity definition, Pro Tec, a women-owned entity, suggests that the
Commission waive the auction requirement for incumbent licensees who also are designated
entities. To that end, Pro Tec suggests that the Commission employ the following criteria to
determine when wide area licenses should be awarded to designated entity incumbents: (1) the
company is a small or women-owned or minority-owned business as defined in the Further
Notice; (2) the entity has a fully constructed and operational 900 MHz system operating on at
least 10 channels; and (3) the existing system, employing a 55-mile contour, currently provides
coverage to 25 percent or more of the population within the MTA. As an alternative, Pro Tec
suggests that the Commission use these three criteria to judge eligibility for higher bidding
credits, e.g., 40 percent. As another alternative, Pro Tec suggests that the Commission limit
bidding on channels that are encumbered by designated entities to other designated entities.
Pro Tec comments that the public interest will be disserved by forcing incumbent designated
entity licensees to pay in auctions for spectrum with money that is better spent on construction of
a wide area system.
148. Small Business Definition. The majority of commenters agree with the
Commission's proposed definition of small businesses as those with gross revenues over the past
three years of $3 million or less. RAM, AMTA, Motorola and Celsmer comment that this limit
will encompass the majority of women-owned and minority-owned businesses. Geotek
comments that due to the relatively low start-up and build-out costs of the 900 MHz service,
small businesses less likely will need special provisions such as bidding credits, installment
payments and reduced down payments in the auction. Geotek and CICS also comment that
affording bidding credits, installment payments, and reduced down payments to entities that
exceed the $3 million threshold may unfairly favor those entities over incumbents. CICS,
however, suggests that the Commission encourage small business participation by using Basic
Trading Areas ("BTAs"), which are smaller service areas, rather than MTAs. Motorola
estimates that 25 per cent or more of all existing SMR licensees have gross revenues of less than
$3 million, and that the Commission's proposal will limit bidding credits to entities that could
successfully compete in the 900 MHz SMR market. AMTA agrees with Motorola's
assessment.
149. Small Common Carrier Coalition ("SCCC"), National Telephone Cooperative
Association ("NTCA"), SBA and Monterey disagree with the Commission's proposed definition,
and urge the Commission to adopt a higher threshold. SCCC contends that the proposed
definition is too narrow to include rural telephone companies, which have a significant amount of
capital necessary to operate a rural telephone company. SCCC suggests that the Commission
use the same definition as that used for broadband PCS, i.e., less than $40 million in gross
revenues for the three preceding years, or a prorated gross revenue cap based on the $40 million
cap. As an example, SCCC states that under a prorated cap, the cap for 10 MHz of SMR
spectrum would be $13.5 million. As another alternative, SCCC suggests that the Commission
base the small business definition on net revenues, which more accurately may reflect a
company's resources. RAM and Geotek disagree with SCCC's suggestion that the
Commission change the proposed small business definition to include rural telephone companies,
stating that rural telephone companies already can take advantage of their existing infrastructure
and do not need any additional advantage over incumbents and new entrants serving rural
areas.
150. SBA, NTCA, and Celsmer recommend that the Commission adopt a $15 million
threshold, based on high construction costs in the 900 MHz SMR service. SBA points out
that, due to high construction costs, an entity with only $3 million in gross revenues could
exhaust half its gross revenue in the construction of two blocks, which could range between
$500,000 and $750,000. As a result, SBA concludes, any business under the $3 million
threshold would be precluded from developing a wide area network. SBA also comments that
the Commission should take into account migration of large commercial entities from the 800
MHz SMR service, as it did when it expanded the size of businesses qualifying as small
businesses in the narrowband PCS auctions due to potential migration from other services.
NTCA contends that there is no record indicating that a business with gross revenues of $3
million or less will be able to raise the capital for construction, and that such a result would
render bidding credits, reduced down payment, and installment payments meaningless. NTCA
also points out that the Commission's proposed $3 million threshold does not meet any SBA-approved small business definition. RAM replies that the Commission should not delay the
auction pending SBA approval on the definition of small businesses.
151. AMTA, Geotek, and Motorola disagree with the suggestion of SBA, NTCA, and
SCCC that the Commission adopt a $15 million threshold. AMTA and Geotek disagree on the
basis that the comparisons with broadband PCS, cellular, or even 800 MHz SMR are not relevant
to the 900 MHz spectrum. AMTA points out that there are drastic differences between the
number of licenses available and the size of the licenses in broadband PCS and in 900 MHz.
AMTA also states that the nature of 900 MHz SMR makes it more likely that the build-out of the
system will be less expensive than cellular, PCS or 800 MHz SMR wide-area systems.
Geotek contends that SBA's statement regarding migration from the 800 MHz SMR spectrum is
purely speculative, and that the licenses are not fungible due to technical differences between the
services. AMTA states that SBA's contention that an entity with $15 million in gross revenues
has the wherewithal to construct and operate a 900 MHz SMR system is the precise reason why
such an entity does not need bidding credits. AMTA also urges the Commission not to switch
to a net revenue test, because a large well-financed entity may use accounting methods that
demonstrate very low net revenues. Motorola maintains that expanding the threshold would
dilute the Commission's original purpose of conveying benefits to truly small entities.
152. Discussion. In balancing the objectives set forth in the auction statute, and mindful
of the new parameters set out in Adarand, we will extend eligibility for bidding credits, reduced
down payments and installment payments to all small businesses -- including those owned by
minorities, women and small rural telephone companies. Although we are not providing
separate provisions for minority-owned and women-owned businesses, we will continue to
request bidder information on the short-form filings as to minority and/or women-owned status
(as defined in § 90.814(f)), in addition to small business status and, in analyzing the applicant
pool and the auction results, we will monitor whether we have accomplished substantial
participation by minorities and women through the broad provisions available to small
businesses. This also will assist us in preparing our report to Congress on the success of
designated entities in auctions. If bidding credits only for small businesses prove unsuccessful
in accomplishing participation by a significant number of women and minority-owned entities,
we retain discretion to tailor our approach for future auctions within the parameters of the
Adarand strict scrutiny test.
153. Furthermore, we believe, and are supported by most commenters, that both the $3
million and $15 million small business definitions are appropriate for the 900 MHz SMR service.
We will adopt a "tiered" system for awarding bidding credits, as discussed in further detail at ¶¶
164-165, infra. We believe that a $40 million definition is unwarranted, because build-out costs
are likely to be much lower than those for broadband PCS and regional narrowband PCS.
Additionally, the license supply (1,020) is more abundant and we believe that the costs of
acquiring a 900 MHz SMR license are lower than for broadband or narrowband regional PCS
licenses. We believe that many of the incumbents already licensed in the 900 MHz SMR service
will fall within either one of these definitions of small business, which are a variation of the
definition used for broadband PCS. Although SBA questions whether a $3 million entity can
raise the capital required to build out a wide area network, we have placed reliance on the
estimates both of the industry and industry representatives in determining that the $3 million
figure will be high enough to include truly small businesses. Businesses with gross revenues of
not more than $3 million may have systems only in a single MTA and may not be interested in
building large regional networks. However, in reliance on SBA's suggestion, we also believe
that the $15 million figure is low enough so as not to include businesses that, by industry
standards, would not need the assistance of bidding credits, installment payments, and reduced
down payments to compete successfully in the auction. Furthermore, given the costs of building
out a system spanning several MTA's, a $15 million or less small business definition is
appropriate.
154. We reject SCCC's argument that we should use a small business threshold that is
designed to include most rural telephone companies. By virtue of their existing infrastructure,
rural telephone companies already have an edge over other new entrants. Therefore, we are not
convinced that their ineligibility for bidding credits, installment payments, and reduced down
payments will hinder their entry into 900 MHz SMR services. Moreover, we are adopting
partitioning rules, as discussed at ¶¶ 177-179, infra. We also reject SCCC's request to use a "net
revenues" test for the same reasons we have rejected that test for other auctionable services.
Although we stated in the Competitive Bidding Second Report and Order that we would use a
"net worth" test in most circumstances, we decided subsequently to apply a "gross revenues"
test to auctionable services as a more accurate indicator of a company's size. A gross revenues
test is a clear measure for determining the size of a business and is an established method of
determining size eligibility for various types of federal programs that aid small businesses.
155. Although we received no comment on our proposed attribution level of 25
percent, we have decided that the attribution level for purposes of meeting the financial cap
should be consistent with our treatment of SMR attribution in other contexts. In the CMRS Third
Report and Order, we adopted a cap on the amount of PCS, cellular and SMR spectrum any
single entity could own within a geographic area. Pursuant to Section 20.6(d) of the
Commission's Rules, we established attribution levels for the SMR service as a 20 percent
ownership interest in the applicant. Therefore, we will not attribute the gross revenues of
investors that hold less than a 20 percent interest in the applicant, but we will include the gross
revenues of the applicant's affiliates and investors with ownership interests of 20 percent or
more in the applicant in determining whether an applicant qualifies as a small business. As has
been the case in prior auctions where special provisions for small businesses have been made, it
also is our expectation that a qualifying small business or principals of a qualifying small
business will retain de facto and de jure control of the applicant. In determining attribution when
900 MHz SMR licensees are held indirectly through intervening corporate entities, we will use
the multiplier adopted in the CMRS Third Report and Order for the spectrum aggregation cap.
156. As we noted in the Second R&O and Second Further Notice, U.S. Census Data
shows that approximately 99 percent of all women-owned businesses and 99 percent of all
minority-owned businesses generated net receipts of $1 million or less. Thus, we expect that
we will capture the majority of minority and women-owned businesses within these categories.
In doing so, we believe that we will satisfy the requirement of § 309(j) to provide opportunities
for business owned by minority groups and women to participate in the provision of spectrum
based services. Moreover, in light of the statute's instruction to "design and test multiple
alternative methodologies," we believe that the 900 MHz SMR service may be a suitable
service in which to assess the effectiveness of more uniform measures, because capital entry
requirements are expected to be lower than PCS and the spectrum is occupied by incumbents
who will not be required to relocate. In designing our auction rules for broadband PCS, we
observed that the different capital requirements of each spectrum-based service would influence
our decision as to the types of provisions necessary for designated entities. In that context, we
decided that lack of access to capital for women and minorities becomes especially problematic
for very costly spectrum-based services, such as broadband or regional narrowband PCS and
nationwide narrowband PCS. As a result, we found that women and minorities could not
overcome historical difficulties in accessing capital without additional provisions. We also
decided that such targeted provisions may not be necessary in other less costly spectrum-based
services. Our expectation is that while 900 MHz MTA service may be a capital-intensive
undertaking, it should require considerably less capital than broadband or regional narrowband
PCS, thereby providing greater opportunities for participation by smaller businesses, including
those owned by women and minorities. For these reasons, we disagree with NABOB's argument
that our rules would be inconsistent with the mandate of § 309(j) of the Communications Act.
3. Bidding Credits
157. Background. Bidding credits allow eligible designated entities to receive a payment
discount for their winning bid in an auction. In the Competitive Bidding Second Report &
Order, we determined that competitive bidding rules applicable to individual services would
specify the designated entities eligible for bidding credits and the amounts of the available
bidding credits for that particular service. In the Competitive Bidding Third Report &
Order, we determined that eligible designated entities in the nationwide narrowband PCS
auction would receive a 25 percent bidding credit. In the regional narrowband PCS auction,
designated entities would receive a 40 percent bidding credit. For broadband PCS, we
originally adopted a "tiered approach" of awarding 10 percent to small businesses, 15 percent to
minority-owned and women-owned entities, and 25 percent to small businesses that also are
owned by women or minorities. After Adarand, we modified the broadband PCS rule to
provide a single bidding credit of 25 percent for small businesses.
158. For the 900 MHz SMR service, we proposed to offer a 10 percent bidding credit to
small businesses bidding on any of the ten-channel blocks within each MTA.
Although we proposed to limit eligibility for bidding credits to small businesses, we also sought
comment on whether this eligibility should be expanded to include businesses owned by
minorities and/or women, even if they do not fall within our small business size standards for
900 MHz SMRs. We also sought comment on a second bidding credit alternative, which
would entitle small businesses, and minority and women-owned businesses to receive bidding
credits on the five least encumbered blocks in each MTA. We asked whether, assuming
bidding credits were limited to small businesses, we also should limit availability of the credit to
the channel blocks with the fewest incumbents; what bidding credit amounts should apply to
women and minority-owned businesses and small businesses; whether women-owned and
minority-owned businesses that also are small businesses should receive an aggregated bidding
credit; and the ramifications of each proposal for the incumbents in each block. We also asked
whether some other amount was appropriate for a bidding credit.
159. Comments. Most commenters agree with the Commission's proposal to limit
bidding credits to small businesses, but disagree on the amount of the credit and whether they
should apply to encumbered blocks. Both Geotek and AMTA agree that 10 percent is a
reasonable amount. Nextel and the Council of Independent Communications Suppliers
("CICS") contend that the Commission's proposal will meet legislative intent to ensure
participation by designated entities. Celsmer, though supportive of bidding credits for small
businesses, comments that 10 percent is too low because, although the start-up costs may not be
great, small bidders will bid directly against large communications corporations for the same
licenses. Celsmer concludes that a higher bidding credit is warranted in light of the
Commission's decision not to set aside an entrepreneur's block, in which smaller businesses
would only bid against each other. RAM, however, comments that because they believe 900
MHz SMR systems are worth a fraction of the value of PCS frequencies, the proposed bidding
credit is too high.
160. Geotek, RAM, and AMTA comment that bidding credit(s) should be limited to
unencumbered blocks, because doing otherwise would unfairly prejudice incumbents, would
lead to speculative bidding and anti-competitive behavior such as "greenmailing," and is not
statutorily mandated. As an alternative, Geotek proposes that designated entities bidding on
unencumbered spectrum receive no higher credit than incumbents. RAM also comments that
incumbent licensees should be given priority over new entrants to expand their networks and
prefers that a lower bidding credit apply to all blocks, as opposed to a higher bidding credit on
the least encumbered blocks. AMTA suggests that the Commission limit bidding credits to the
three least encumbered blocks in each MTA. Celsmer agrees with RAM that the Commission
should not afford new applicants bidding credits on encumbered blocks, but disagrees with
AMTA's suggestion that the Commission should not afford any bidding credits on encumbered
blocks, as that would prejudice incumbent small businesses bidding on their own blocks.
161. Pro Tec suggests that any existing incumbent designated entity that meets its three
criteria should be given at least a 40 percent bidding credit. Pro Tec asserts that such
bidding credits would encourage greater participation in the auction process by small businesses,
women and minorities.
162. SBA contends that the Commission should wait until the conclusion of the 800
MHz SMR auction before setting the rules for 900 MHz SMR. If, at that time, the
Commission determines that there will be significant migration of unsuccessful 800 MHz bidders
into 900 MHz, the Commission either should adopt a greater bidding credit or establish an
entrepreneurs' block in 900 MHz.
163. In response to our Public Notice requesting comment on the impact of the Adarand
decision on the Commission's 900 MHz SMR proposals, Geotek supplemented its comments
by suggesting that "no compelling governmental interest" exists for expanding bidding credit
eligibility beyond the small business definition proposed by the Commission.
164. Discussion. We will adopt a proposal to offer small businesses a bidding credit on
all blocks on a "tiered" basis similar to the one originally offered for broadband PCS .
Accordingly, very small businesses with gross revenues that are not more than $3 million for the
preceding three years are entitled to a 15 percent bidding credit on all blocks; small businesses
with gross revenues that are not more than $15 million for the preceding three years are entitled
to a 10 percent bidding credit on all blocks. Bidding credits for small businesses are not
cumulative. Thus a $3 million small business will be eligible for only a 15 percent bidding
credit, not a 25 percent credit. This formula strikes a reasonable compromise between the new
applicants who favor a higher bidding credit on all blocks, and the incumbent commenters who
favor a lower bidding credit only on unencumbered blocks. We also believe that limiting the
bidding credit to small businesses poses the slightest risk of legal challenge (and accompanying
delay) in light of the Adarand decision. Considering the dormancy of the 900 MHz SMR
spectrum, we believe that avoiding any further delay in the Phase II licensing process is of
paramount importance. Tiered bidding credits are narrowly tailored to the varying abilities of
businesses to access capital. Smaller businesses have more difficulty accessing capital and thus
need a higher bidding credit. Tiering also takes into account that different small businesses will
pursue different strategies, such as single MTAs, large regions or nationwide coverage.
165. Along with other provisions in this Order, these bidding credits will help to achieve
the objectives of Congress by providing small businesses, including women-owned and
minority-owned small businesses, with a meaningful opportunity to obtain licenses in the 900
MHz SMR auction, while accommodating the concerns of incumbents within the DFAs.
While some discount is needed to put small businesses on equal footing with other larger
applicants, given the large number of licenses available in this service (i.e., 1,020), we believe it
is unnecessary to provide a higher bidding credit, such as that provided for certain designated
entities in regional narrowband PCS. In narrowband PCS and broadband PCS, we limited the
channel blocks on which bidding credits were available to designated entities. In IVDS, we
permitted the use of bidding credits on both available channels, yet imposed a limit of one
bidding credit per service area. Due to the characteristics of the 900 MHz SMR service, we
will offer bidding credits for eligible designated entities on all channel blocks in each MTA,
rather than limiting this measure to certain blocks. Due to the presence of incumbents
throughout all blocks, it is difficult to choose certain blocks for bidding credits. Furthermore, it
would be impossible to determine the least encumbered blocks, because they vary from market to
market. Additionally, we believe that we will provide greater opportunities for small businesses
by offering bidding credits across all blocks, and will not limit applicants from pursuing regional
or nationwide strategies. Unless we offer bidding credits across all blocks, we would be
depriving small businesses of the opportunity to pursue regional and nationwide strategies.
4. Reduced Down Payments/Installment Payments
166. Background. We noted in the Competitive Bidding Second Report & Order that
allowing installment payments reduces the amount of private financing needed by prospective
small business licensees and therefore mitigates the effect of limited access to capital by small
businesses, especially those owned by minorities and/or women. Thus, we proposed in the
Second R&O and Second Further Notice to adopt an installment payment option for small
businesses that are winning bidders in the 900 MHz SMR auction. Additionally, we
tentatively concluded that small businesses that are eligible for installment payments may pay a
reduced down payment.
167. Comments. AMTA, Celsmer, SBA and CICS support the Commission's proposal
to offer reduced down payments and installment payments to small businesses. Celsmer
comments that such options would ease the financial burden on small businesses that may have
to rely on private sectors loans to meet the burdens of acquisition, construction, and
maintenance. AMTA, however, suggests that the Commission limit these options to
unencumbered blocks, or to the three least encumbered blocks in each MTA.
168. Discussion. We will adopt both the installment payment and reduced down
payment options for small businesses that are winning bidders in the 900 MHz SMR auction.
However, to encourage maximum small business participation, and for the reasons discussed at
¶¶ 164-165, supra, we reject AMTA's suggestion to limit these options to bidders for
unencumbered blocks or the three least encumbered blocks. In light of the Adarand decision,
and to avoid further delay in auctioning the 900 MHz SMR spectrum, our decision to limit
installment payments and reduced down payments to small businesses not only is the best legal
course, but most likely will confer those benefits on the majority of minority-owned and women-owned entities.
169. Small businesses, including those owned by minorities and women, face capital
access difficulties not encountered by other firms. Thus, they require special measures to ensure
their opportunity to participate in the 900 MHz SMR service, and we will provide an "enhanced"
installment payment plan similar to the one set out in the Competitive Bidding Fifth Report and
Order. Licensees who qualify for installment payments will be entitled to pay their winning
bid amount in quarterly installments over the term of the license, with interest charges to be fixed
at the time of licensing at a rate equal to the rate for ten-year U.S. Treasury obligations plus 2.5
percent. Pursuant to this enhanced installment payment plan, small businesses that fall under the
$15 million definition will be required to pay interest only for the first two years of the license
term at the same interest rate as set forth in the rule. Interest will accrue at the Treasury note rate
plus 2.5 percent. Small businesses that fall under the $3 million definition will be able to make
interest-only payments for five years. Interest will accrue at the Treasury note rate without the
additional 2.5 percent. Timely payment of all quarterly installments will be a condition of the
license grant, and failure to make such timely payment will be grounds for revocation of the
license.
170. Licensees who qualify for reduced down payments will be required to pay five
percent of the winning bid five days after the auction closes, with the remaining five percent
down payment due five days after Public Notice that the Commission is prepared to award the
license. The Commission will grant the license generally within ten (10) business days after
receiving such down payment.
5. Transfer Restrictions and Unjust Enrichment Provisions
171. Discussion. In the Competitive Bidding Fifth Report & Order, we adopted
restrictions on the transfer or assignment of entrepreneurs' block licenses to ensure that
designated entities do not take advantage of special provisions by immediately assigning or
transferring control of their licenses. In the Competitive Bidding Third Report and Order, we
adopted restrictions for narrowband PCS on the transfer of licenses to non-designated entities.
Women and minority-owned and small business licensees who transferred licenses to non-qualifying designated entities were required to repay any benefits conferred prior to the transfer.
As in the 900 MHz SMR service, narrowband PCS did not contain a separate entrepreneurs'
block. In the Second R&O and Second Further Notice, we proposed to adopt these restrictions
on transfer and assignment of licenses won by designated entities. We received no comments
on this proposal.
172. The Commission's unjust enrichment provisions are integral to the success of the
special provisions provided to designated entities in the various auctionable services. In the
Competitive Bidding Second Report & Order, we outlined unjust enrichment provisions
applicable specifically to designated entities. We established these provisions to deter
speculation and participation in the licensing process by those who do not intend to offer service
to the public, or who intend to use our provisions to obtain a license at a lower cost than they
otherwise would have to pay, and later to sell it for a profit.
173. Licensees seeking to transfer their licenses to entities which do not qualify as small
businesses, as a condition to approval of the transfer, must remit to the government a payment
equal to a portion of the total value of the benefit conferred by the government. Thus, a small
business that received bidding credits seeking transfer or assignment of a license to an entity that
is not a small business or does not qualify as a smaller business under the definitions in §
90.814(b)(1), will be required to reimburse the government for the amount of the bidding credit,
plus interest at the rate imposed for installment financing at the time the license was awarded,
before transfer will be permitted. The amount of this payment will be reduced over time as
follows: a transfer in the first two years of the license term will result in a forfeiture of 100
percent of the value of the bidding credit: in year three of the license term the payment will be 75
percent; in year four the payment will be 50 percent and in year five the payment will be 25
percent, after which there will be no payment. If a small business under the $3 million definition
seeks to transfer or assign a license to a small business under the $15 million definition, for the
purposes of determining the amount of payment, the value of the bidding credit is 5 percent, the
difference between the 10 and 15 percent bidding credits. The 5 percent difference will be
subject to the same percentage reductions over time as specified above. These assessments will
have to be paid to the U.S. Treasury as a condition of approval of the assignment or transfer.
174. To ensure that large businesses do not become the unintended beneficiaries of
measures meant for smaller firms, we propose to apply the unjust enrichment provisions adopted
for narrowband PCS to installment payments for the 900 MHz SMR service. Specifically, if a
licensee that was awarded installment payments seeks to assign or transfer control of its license
during its term to an entity that does not meet either of the definitions set forth in Section
90.814(b)(1), we will require payment of the remaining principal and any interest accrued
through the date of assignment as a condition of the license assignment or transfer. Moreover, if
a small business that meets the $3 million definition seeks to assign or transfer control of a
license to a small business that meets the $15 million definition (that does not qualify for as
favorable an installment payment plan), the installment payment plan for which the acquiring
entity qualifies will become effective immediately upon transfer. Thus, a higher interest rate and
earlier payment of principal may begin to be applied. For example, a transfer of a license in the
fourth year after license grant from a small business that meets the $3 million definition to a
small business that meets the $15 million definition will require the transferee to begin principal
payments and the balance will begin accruing interest at a rate 2.5 percent above the rate that had
been in effect. However, a licensee may not switch its payment plan to a more favorable plan.
Finally, if an investor subsequently purchases an "attributable" interest in the businesses and, as a
result, the gross revenues or total assets of the business exceed the applicable financial caps, this
unjust enrichment provision also will apply. We will apply these payment requirements for the
entire license term to ensure that small businesses will look first to other small businesses when
deciding to transfer their licenses.
6. Partitioning
175. Background. Congress directed the Commission to ensure that, together with other
designated entities, rural telephone companies ("rural telcos") have the opportunity to participate
in the provision of spectrum-based services. Rural areas, because of their more dispersed
populations, tend to be less profitable to serve than more densely populated urban areas.
Therefore, service to these areas may not be a priority or economically feasible for many
licensees. Rural telcos, however, are well positioned because of their existing infrastructure to
serve these areas. Therefore, we proposed a geographic partitioning scheme similar to that
adopted in broadband PCS, which will encourage participation by rural telephone companies,
thereby increasing the likelihood of rapid introduction of service to rural areas.
176. Comments. Only two commenters addressed the Commission's proposal to allow
partitioning by rural telephone companies. NTCA favors such partitioning as a means to bring
wireless services to rural areas and satisfy the statutory mandate. NTCA requests, however,
that the Commission remove the presumption that a partitioned service area is reasonably related
to the company's wireline service area if it contains no more than twice the population overlap.
NTCA favors a policy that would approve the partitioning agreement as long as the partitioned
area contained the rural telco's wireline service area, thereby giving consortia the flexibility they
need to create efficient service areas while meeting the needs of sparsely populated areas.
NTCA also notes that elimination of the presumption will eliminate the disposition of time-consuming waiver requests that can result in delayed service.
177. Discussion. We will adopt the partitioning scheme as proposed in the Second R&O
and Second Further Notice, and deny NTCA's request to change the "reasonably related"
presumption for post-auction partitioning. This partitioning scheme will prevent rural telephone
companies from having to bid on the entire MTA license to obtain licenses covering their
wireline service areas. In addition, partitioning will provide rural telcos with the flexibility to
serve areas in which they already provide service, while the remainder of the service area could
be served by other providers.
178. Rural telcos are permitted to acquire partitioned 900 MHz SMR licenses in either
of two ways: (1) they may form bidding consortia to participate in auctions, and then partition
the licenses won among consortia participants; and (2) they may acquire partitioned 900 MHz
SMR licenses from other licensees through private negotiation and agreement either before or
after the auction. Each member of a consortium will be required to file a long-form
application, following the auction, for its respective mutually agreed-upon geographic area.
Partitioned areas must conform to established geopolitical boundaries (such as county lines).
With respect to rural telcos, each area must include all portions of the wireline service area of the
rural telco applicant that lies within MTA service area. We also will use the definition for
rural telcos implemented in the Competitive Bidding Fifth Report & Order for broadband PCS.
Rural telcos are defined as local exchange carriers having 100,000 or fewer access lines,
including all affiliates.
179. In addition, we deny NTCA's request to change the "reasonably related"
presumption for rural telco post-auction partitioning. The rural telco post-auction partitioning
scheme was developed in response to Section 309(j)(3) of the Communications Act's explicit
mandate to promote economic opportunities for rural telcos. If "reasonably related" service was
not required, there would be no justification for allowing only rural telcos to obtain partitioned
licenses, because the rural telco would essentially be no different than any other applicant.
However, the Commission intends to explore the issue as to whether to adopt a more general
partitioning scheme in a future proceeding. Thus, if a rural telco receives a partitioned license
post-auction from another MTA licensee, the partitioned area must be reasonably related to the
rural telco's wireline service area that lies within the MTA service area. In our proposed rule in
the Second R&O and Second Further Notice, we indicated that we would presume as "reasonably
related" a partitioned area that contains no more than twice the population of that portion of a
rural telco's wireline service area that lies within the MTA service area. NTCA's argument to
change this presumption is unpersuasive. This presumption, adopted for post-auction
partitioning for rural telcos in the broadband PCS service, has been unchallenged, and NTCA
has not proffered a rationale that would justify distinguishing the post-auction partitioning
procedures in PCS from that of the 900 MHz SMR service. Without such a limitation, a rural
telco (or consortia thereof) easily could circumvent the auction process by obtaining practically
the entire MTA license.
7. Reduced Upfront Payments
180. Discussion. We proposed not to adopt a reduced upfront payment option in the 900
MHz SMR service for designated entities. We received no comments on this proposal.
Accordingly, we believe that a reduced upfront payment option is unnecessary in the 900 MHz
SMR service, in light of the other provisions adopted here (i.e., bidding credits, installments
payments and reduced down payments). Moreover, this will encourage sincere bidding by all
parties.
8. Set-aside Spectrum
181. Background. In the Competitive Bidding Fifth Report & Order we established
entrepreneurs' blocks on which only qualified entrepreneurs, including designated entities, could
bid. We tentatively concluded not to adopt an entrepreneurs' block for the 900 MHz SMR
auction, but requested comment on whether the capital requirements of this service were
anticipated to be so substantial that we should insulate certain blocks from very large bidders in
order to provide meaningful opportunities for designated entities.
182. Comments. In general, most commenters support the Commission's proposal not to
create a separate entrepreneur's block for designated entities. Motorola cites 900 MHz's cost
difference, spectrum availability, and small allocations as factors which will enhance the
effectiveness of bidding credits, reduced down payments and installment payments and render
the establishment of an entrepreneur's block unnecessary.
183. SCCC supports creation of an entrepreneurs' block, stating that the absence of an
entrepreneur's block will mean poor bidding odds for rural telephone companies. Monterey
Telecommunications Technology ("Monterey") agrees with SCCC's conclusion. According to
SCCC, without an entrepreneur's block, rural telephone companies ("rural telcos") will have to
bid against companies with deep pockets for scarce 900 MHz spectrum, effectively shutting the
rural telcos out of the auction. The SBA suggests that the Commission establish an
entrepreneur's block (or increase the bidding credits for small businesses, discussed at ¶ 162,
infra) if the Commission adopts the SBA's suggestion to postpone the adoption of the 900 MHz
SMR rules until it has completed the rule making in the 800 MHz SMR docket.
184. Discussion. We will not adopt an entrepreneur's block in the 900 MHz SMR
service for several reasons. First, the large numbers of licenses available and relatively small
spectrum allocations in the 900 MHz SMR service should allow for extensive small business
participation. Second, unlike broadband PCS, the effectiveness of bidding credits, reduced
down payments and installment payments will not be diluted, due to the smaller capital outlay
anticipated for this service. With respect to SCCC's concern, we do not believe that we need to
provide more enhancements for rural telcos which, in addition to having the existing
infrastructure, may qualify as a small business or may take advantage of our partitioning rules.
We also reject the SBA's final suggestion as moot, as the Commission has determined not to
postpone the adoption of 900 MHz SMR rules until the completion of the 800 MHz SMR rule
making.
9. Other Matters
185. Although we did not request comment on this issue, the National Paging and
Personal Communications Association ("NPPCA") suggests that the Commission establish a
Telecommunications Development Fund ("TDF") to assist small businesses in accessing capital
for build-out purposes. To that end, NPPCA suggests three alternative funding schemes for
the TDF: (1) Upfront payments should be placed in an interest-bearing account, with the interest
money used to fund the TDF; (2) Use part of the proceeds from the spectrum auctions to fund
the TDF (as RTC did to support purchase of property by minorities); or (3) Use development
banks on a domestic and international level, or other private sector funding. NPPCA also
suggests the TDF could administer loans, and that funding small business ventures through a
TDF would foster diversity in the telecommunications industry.
186. Discussion. While we fully support the goal of "ensur[ing] that small businesses . .
. are given the opportunity to participate in the provision of spectrum-based services" and
recognize that access to capital is key to such opportunities, the small business financing
proposal raised by NPPCA is beyond the scope of this proceeding. As such, it will not be
addressed here.
VI. CONCLUSION
187. We believe that the auction rules adopted in this Order will promote the public
policy goals set forth by Congress. The rules should facilitate the rapid implementation of the
900 MHz SMR service, thus advancing the public interest by fostering economic growth of
competitive new services via efficient spectrum use. The rules will allow the public to recover a
portion of the value of the public spectrum, and will promote access to 900 MHz SMR services
by consumers, producers, and new entrants, by ensuring that designated entities will have
genuine opportunities to participate in the auctions and in the provision of service.
VII. PROCEDURAL MATTERS AND ORDERING CLAUSES
188. The Final Regulatory Flexibility Analysis, as required by Section 604 of the
Regulatory Flexibility Act is set forth in Appendix B.
189. Accordingly, IT IS ORDERED that, pursuant to the authority of Sections 4(i)
303(r), 309(j), and 332 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
303(r), 309(j), and 332, this Second Order on Reconsideration and Seventh Report and Order is
adopted and Part 90 of the Commission's Rules IS AMENDED as set forth in the attached
Appendix A.
190. IT IS FURTHER ORDERED that the rule amendments set forth in Appendix A
WILL BECOME EFFECTIVE 30 days after publication in the Federal Register.
191. IT IS FURTHER ORDERED, that the Petitions for Reconsideration filed by
Advanced Mobilecomm, Inc., American Mobile Telecommunications Association, Celsmer, DW
Communications, Inc., Geotek Communications, Inc., Nextel, Personal Communications
Industry Association, RAM Mobile Data Limited Partnership, and Southern California Edison
Company are GRANTED to the extent discussed herein, and DENIED in all other respects.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton
Acting Secretary
APPENDIX A
FINAL RULES
Part 90 of Chapter I of Title 47 of the Code of Federal Regulations is amended as
follows:
PART 90 -- PRIVATE LAND MOBILE RADIO SERVICES
1. The authority citation for Part 90 is revised to read as follows:
Authority: Sections 4, 303, 309 and 332, 48 Stat. 1066, 1082, as amended; 47 U.S.C. §§
154, 303, 309 and 332, unless otherwise noted.
2. Section 90.7 is amended to read as follows:
§ 90.7 Definitions.
* * * * *
900 MHz SMR MTA-based license or MTA license. A license authorizing the right to use a
specified block of 900 MHz SMR spectrum within one of the 47 Major Trading Areas
("MTAs"), as embodied in Rand McNally's Trading Area System MTA Diskette and
geographically represented in the map contained in Rand McNally's Commercial Atlas &
Marketing Guide (the "MTA Map"), with the following exceptions and additions:
(1) Alaska is separated from the Seattle MTA and is licensed separately.
(2) Guam and the Northern Mariana Islands are licensed as a single MTA-like area.
(3) Puerto Rico and the United States Virgin Islands are licensed as a single MTA-like
area.
(4) American Samoa is licensed as a single MTA-like area.
* * * * *
2. Section 90.173 is amended by revising paragraph (k) to read as follows:
§ 90.173 Policies governing the assignment of frequencies.
* * * * *
(k) Notwithstanding any other provisions of this part, any eligible person may seek a dispositive
preference for a channel assigned on an exclusive basis in the 220-222 MHz, 470-512 MHz, and
800 MHz bands by submitting information that leads to the recovery of channels in these bands.
Recovery of such channels must result from information provided regarding the failure of
existing licensees to comply with the provisions of §§ 90.155, 90.157, 90.629, 90.631 (e) or (f),
or 90.633 (c) or (d). Any recovered channels in the 900 MHz SMR service will revert
automatically to the MTA licensee.
* * * * *
3. Section 90.617(d) is amended by revising Table 4B to read as follows:
§ 90.617 Frequencies in the 809.750-824/854.750-869 MHz, and 896-901/935-940 MHz
bands available for trunked or conventional system use in non-border areas.
(d)* * * * *
Table 4B- SMR Category 896-901/935-940 MHz Band-Channels
(200 Channels):
Block Channel Nos.
A 1-2-3-4-5-6-7-8-9-10
B 21-22-23-24-25-26-27-28-29-30
C 41-42-43-44-45-46-47-48-49-50
D 61-62-63-64-65-66-67-68-69-70
E 81-82-83-84-85-86-87-88-89-90
F 101-102-103-104-105-106-107-108-109-110
G 121-122-123-124-125-126-127-128-129-130
H 141-142-143-144-145-146-147-148-149-150
I 161-162-163-164-165-166-167-168-169-170
J 181-182-183-184-185-186-187-188-189-190
K 201-202-203-204-205-206-207-208-209-210
L 221-222-223-224-225-226-227-228-229-230
M 241-242-243-244-245-246-247-248-249-250
N 261-262-263-264-265-266-267-268-269-270
O 281-282-283-284-285-286-287-288-289-290
P 301-302-303-304-305-306-307-308-309-310
Q 321-322-323-324-325-326-327-328-329-330
R 341-342-343-344-345-346-347-348-349-350
S 361-362-363-364-365-366-367-368-369-370
T 381-382-383-384-385-386-387-388-389-390
* * * * *
4. Section 90.619(a)(5) is amended by revising Table 4B to read as follows:
§90.619 Frequencies available for use in the U.S./Mexico and U.S./Canada border areas.
(a)* * * * *
(5)* * * * *
TABLE 4B - UNITED STATES-MEXICO BORDER AREA, SMR CATEGORY
896-901/935-940 MHZ BAND (200 CHANNELS):
_____________________________________________________________________________
Channels numbered above 200 may be used only subject to the power flux density limits at or
beyond the Mexican border stated in paragraph (a)(2) of this section:
Block Channel Nos.
A 1-2-3-4-5-6-7-8-9-10
B 21-22-23-24-25-26-27-28-29-30
C 41-42-43-44-45-46-47-48-49-50
D 61-62-63-64-65-66-67-68-69-70
E 81-82-83-84-85-86-87-88-89-90
F 101-102-103-104-105-106-107-108-109-110
G 121-122-123-124-125-126-127-128-129-130
H 141-142-143-144-145-146-147-148-149-150
I 161-162-163-164-165-166-167-168-169-170
J 181-182-183-184-185-186-187-188-189-190
K 201-202-203-204-205-206-207-208-209-210
L 221-222-223-224-225-226-227-228-229-230
M 241-242-243-244-245-246-247-248-249-250
N 261-262-263-264-265-266-267-268-269-270
O 281-282-283-284-285-286-287-288-289-290
P 301-302-303-304-305-306-307-308-309-310
Q 321-322-323-324-325-326-327-328-329-330
R 341-342-343-344-345-346-347-348-349-350
S 361-362-363-364-365-366-367-368-369-370
T 381-382-383-384-385-386-387-388-389-390
* * * * *
5. Section 90.631 is amended by revising paragraphs (f) and (i) to read as follows:
§ 90.631 Trunked systems loading, construction and authorization requirements.
* * * * *
(f) If a station is not placed in permanent operation, in accordance with the technical parameters
of the station authorization, within one year, except as provided in § 90.629, its license cancels
automatically and must be returned to the Commission. For purposes of this section, a base
station is not considered to be placed in operation unless at least two associated mobile stations,
or one control station and one mobile station, are also placed in operation. An SMR licensee
with facilities that have discontinued operations for 90 continuous days after the effective date of
this rule is presumed to have permanently discontinued operations, unless the licensee notifies
the FCC otherwise prior to the end of the 90 day period and provides a date on which operation
will resume, which date must not be in excess of 30 additional days.
* * * * *
6. Section 90.665(c) and (d) are amended to read as follows:
§ 90.665 Authorization, construction and implementation of MTA licenses.
* * * * *
(c) Each MTA licensee in the 896-901/935-940 MHz band must, three years from the date of
license grant, construct and place into operation a sufficient number of base stations to provide
coverage to at least one-third of the population of the MTA. Further, each MTA licensee must
provide coverage to at least two-thirds of the population of the MTA five years from the date of
license grant or, alternatively, demonstrate through a showing to the Commission that it is
providing substantial service. The MTA licensee must meet the population coverage benchmarks
regardless of the extent to which incumbent licensees are present within the MTA block.
(d) MTA licensees who fail to meet the coverage requirements imposed at either the third or
fifth years of their license term, or to make a convincing showing of substantial service, will
forfeit the portion of the MTA license that exceeds licensed facilities constructed and operating
on the date of the MTA license grant.
7. Section 90.667 is amended to read as follows:
§ 90.667 Grandfathering provisions for incumbent licensees.
(a) These provisions apply to all 900 MHz SMR licensees who obtained licenses or filed
applications for secondary sites on or before August 9, 1994 ("incumbent licensees"), as well as
to all 900 MHz SMR licensees who obtained authorizations pursuant to Section 90.173(k). An
incumbent licensee's service area shall be defined by its originally-licensed 40 dBu field strength
contour. Incumbent licensees are permitted to add new or modify transmit sites in this existing
service area without prior notification to the Commission so long as their original 40 dBu field
strength contour is not expanded.
(b) Incumbent licensees operating at multiple sites may, after grant of MTA licenses has been
completed, exchange multiple site licenses for a single license, authorizing operations throughout
the contiguous and overlapping 40 dBu field strength contours of the multiple sites. Incumbents
exercising this license exchange option must submit specific information for each of their
external base sites after the close of the 900 MHz SMR auction.
(c) Applications in the 900 MHz SMR service for secondary sites filed after August 9, 1994
shall be authorized on a secondary, non-interference basis to MTA licensee operations. No
secondary sites shall be granted on this basis in an MTA once the MTA licensee has been
selected.
6. A new subpart U consisting of §§ 90.801 through 90.814 is added to Part 90 to read as
follows:
Subpart U -- Competitive Bidding Procedures for 900 MHz Specialized Mobile Radio
Service
Sec.
90.801 900 MHz SMR subject to competitive bidding.
90.802 Competitive bidding design for 900 MHz SMR licensing.
90.803 Competitive bidding mechanisms.
90.804 Aggregation of 900 MHz SMR licenses.
90.805 Withdrawal, default and disqualification payments.
90.806 Bidding application (FCC Form 175 and 175-S Short-form).
90.807 Submission of upfront payments and down payments.
90.808 Long-form applications.
90.809 License grant, denial, default, and disqualification.
90.810 Bidding credits for small businesses.
90.811 Reduced down payment for licenses won by small businesses.
90.812 Installment payments for licenses won by small businesses.
90.813 Procedures for partitioned licenses.
90.814 Definitions.
90.815 Eligibility for small business status
§ 90.801 900 MHz SMR subject to competitive bidding.
Mutually exclusive initial applications to provide 900 MHz SMR service are subject to
competitive bidding procedures. The general competitive bidding procedures found in 47 CFR
Part 1, Subpart Q will apply unless otherwise provided in this part.
§ 90.802 Competitive bidding design for 900 MHz SMR licensing.
The Commission will employ a simultaneous multiple round auction design when choosing from
among mutually exclusive initial applications to provide 900 MHz SMR service, unless
otherwise specified by the Wireless Telecommunications Bureau before the auction.
§ 90.803 Competitive bidding mechanisms.
(a) Sequencing. The Wireless Telecommunications Bureau will establish and may vary the
sequence in which 900 MHz SMR licenses will be auctioned.
(b) Grouping. All 900 MHz SMR licenses for each of the MTAs will be auctioned
simultaneously, unless the Wireless Telecommunications Bureau announces, by Public Notice
prior to the auction, an alternative auction scheme.
(c) Minimum Bid Increments. The Wireless Telecommunications Bureau will, by
announcement before or during an auction, require minimum bid increments in dollar or
percentage terms.
(d) Stopping Rules. The Wireless Telecommunications Bureau will establish stopping rules
before or during multiple round auctions in order to terminate an auction within a reasonable
time.
(e) Activity Rules. The Wireless Telecommunications Bureau will establish activity rules which
require a minimum amount of bidding activity. In the event that the Commission establishes an
activity rule in connection with a simultaneous multiple round auction, each bidder will be
entitled to request and will be automatically granted a certain number of waivers of such rule
during the auction.
§ 90.804 Aggregation of 900 MHz SMR licenses.
The Commission will license each 10-channel block in the 900 MHz SMR spectrum separately.
Applicants may aggregate across spectrum blocks within the limitation specified in § 20.6(b) of
this Chapter.
§ 90.805 Withdrawal, default and disqualification payments.
(a) During the course of an auction conducted pursuant to § 90.802, the Wireless
Telecommunications Bureau will impose payments on bidders who withdraw high bids during
the course of an auction, who default on payments due after an auction closes, or who are
disqualified.
(b) Bid withdrawal prior to close of auction. A bidder who withdraws a high bid during the
course of an auction will be subject to a payment equal to the difference between the amount bid
and the amount of the winning bid the next time the license is offered by the Commission. No
withdrawal payment would be assessed if the subsequent winning bid exceeds the withdrawn bid.
This payment amount will be deducted from any upfront payments or down payments that the
withdrawing bidder has deposited with the Commission.
(c) Default or disqualification after close of auction. If a high bidder defaults or is disqualified
after the close of such an auction, the defaulting bidder will be subject to the payment in
paragraph (b) of this section plus an additional payment equal to three (3) percent of the
subsequent winning bid. If the subsequent winning bid exceeds the defaulting bidder's bid
amount, the 3 percent payment will be calculated based on the defaulting bidder's bid amount.
These amounts will be deducted from any upfront payments or down payments that the
defaulting or disqualified bidder has deposited with the Commission. If the default occurs within
five business days after the bidding has closed, the Commission retains the discretion to offer the
license to the second highest bidder at its final bid level, or if that bidder declines the offer, to
offer the license to other bidders (in descending order of their bid amounts) at the final bid levels.
§ 90.806 Bidding application (FCC Form 175 and 175-S Short-form).
All applicants to participate in competitive bidding for 900 MHz SMR licenses must submit
applications on FCC Forms 175 and 175-S pursuant to the provisions of § 1.2105 of this Chapter.
The Wireless Telecommunications Bureau will issue a Public Notice announcing the availability
of 900 MHz SMR licenses and, in the event that mutually exclusive applications are filed, the
date of the auction for those licenses. This Public Notice also will specify the date on or before
which applicants intending to participate in a 900 MHz SMR auction must file their applications
in order to be eligible for that auction, and it will contain information necessary for completion
of the application as well as other important information such as the materials which must
accompany the Forms, any filing fee that must accompany the application or any upfront
payment that will need to be submitted, and the location where the application must be filed. In
addition to identifying its status as a small business or rural telephone company, each applicant
must indicate whether it is a minority-owned entity, as defined in § 90.814(g) and/or a women-owned entity.
§ 90.807 Submission of upfront payments and down payments.
(a) Each bidder in the 900 MHz SMR auction will be required to submit an upfront payment of
$0.02 per MHz per pop, for the maximum number of licenses (in terms of MHz-pops) on which
it intends to bid pursuant to § 1.2106 of this Chapter and procedures specified by Public Notice.
(b) Each winning bidder in the 900 MHz SMR auction shall make a down payment to the
Commission in an amount sufficient to bring its total deposits up to 20 percent of its winning bid
within five business days after the auction closes, and the remaining balance due on the license
shall be paid within five business days after Public Notice announcing that the Commission is
prepared to award the license. The grant of the application required by § 90.808 is conditional
upon receipt of full payment, except for small businesses that are winning bidders, which are
governed by § 90.811. The Commission generally will grant the license within ten (10) business
days after the receipt of the remaining balance due on the license.
§ 90.808 Long-form applications.
Each winning bidder will be required to submit a long-form application on FCC Form 600 within
ten (10) business days after being notified by Public Notice that it is the winning bidder.
Applications on FCC Form 600 shall be submitted pursuant to the procedures set forth in 90.119
of this Part and any associated Public Notices. Only auction winners (and rural telephone
companies and incumbent 900 MHz SMR licensees seeking partitioned licenses pursuant to
agreements with auction winners under § 90.813) will be eligible to file applications on FCC
Form 600 for initial 900 MHz SMR licenses in the event of mutual exclusivity between
applicants filing Form 175.
§ 90.809 License grant, denial, default, and disqualification.
(a) A bidder who withdraws its bid subsequent to the close of bidding, defaults on a payment
due, or is disqualified, will be subject to the payments specified in § 90.805 of this Part or §
1.2109 of this Chapter, as applicable.
(b) MTA licenses pursued through competitive bidding procedures will be granted pursuant to
the requirements specified in § 90.166.
§ 90.810 Bidding credits for small businesses.
(a) A winning bidder that qualifies as a small business or a consortium of small businesses, (as
defined in § 90.814(b)(1)(i) may use a bidding credit of 15 percent to lower the cost of its
winning bid on any of the blocks identified in § 90.617(d), Table 4B of this Part. A winning
bidder that qualifies as a small business or a consortium of small businesses, (as defined in §
90.814(b)(1)(ii) may use a bidding credit of 10 percent to lower the cost of its winning bid on
any of the blocks identified in § 90.617(d), Table 4B of this Part.
(b) Unjust Enrichment.
(1) A small business seeking transfer or assignment of a license to an entity that is not a small
business under the definitions in § 90.814(b)(1), will be required to reimburse the government for
the amount of the bidding credit, plus interest at the rate imposed for installment financing at the
time the license was awarded, before transfer will be permitted. The amount of this payment will
be reduced over time as follows: a transfer in the first two years of the license term will result in
a forfeiture of 100 percent of the value of the bidding credit: in year three of the license term the
payment will be 75 percent; in year four the payment will be 50 percent and in year five the
payment will be 25 percent, after which there will be no assessment. If a small business as
defined in § 90.814(b)(1)(i) seeks to transfer or assign a license to a small business as defined in
§ 90.814(b)(1)(ii), the value of the bidding credit to be repaid is five percent, the difference
between the 10 and 15 percent bidding credits. The five percent difference will be subject to the
percentage reductions over time specified above. These payments must be paid back to the U.S.
Treasury as a condition of approval of the assignment or transfer
(2) If a small business that utilizes a bidding credit under this section seeks to assign or transfer
control of its license to a small business meeting the eligibility standards for lower bidding
credits or seeks to make any other change in ownership that would result in the licensee
qualifying for a lower bidding credit under this section, the licensee must seek Commission
approval and reimburse the government for the difference between the amount of the bidding
credit obtained by the licensee and the bidding credit for which the assignee, transferee or
licensee is eligible under this section as a condition of the approval of such assignment, transfer
or other ownership change.
§ 90.811 Reduced down payment for licenses won by small businesses.
Each winning bidder that qualifies as a small business shall make a down payment equal to ten
percent of its winning bid (less applicable bidding credits); a winning bidder shall bring its total
amount on deposit with the Commission (including upfront payment) to five percent of its net
winning bid within five (5) business days after the auction closes, and the remainder of the down
payment (five percent) shall be paid within five (5) business days following Public Notice that
the Commission is prepared to award the license. The Commission generally will grant the
license within ten (10) business days after receipt of the remainder of the down payment.
§ 90.812 Installment payments for licenses won by small businesses.
(a) Each licensee that qualifies as a small business may pay the remaining 90 percent of the net
auction price for the license in quarterly installment payments pursuant to § 1.2110(e) of this
Chapter. Licensees who qualify for installment payments are entitled to pay their winning bid
amount in installments over the term of the license, with interest charges to be fixed at the time
of licensing at a rate equal to the rate for ten-year U.S. Treasury obligations plus 2.5 percent.
Payments shall include both principal and interest amortized over the term of the license. An
MTA license issued to an eligible small business that elects installment payments will be
conditioned on the full and timely performance of the license holder's quarterly payments. The
additional following terms apply:
(1) An eligible licensee qualifying as a small business under Section 90.814(b)(1)(i) may make
interest-only payments for five years. Interest will accrue at the Treasury note rate. Payments of
interest and principal shall be amortized over the remaining five years of the license term.
(2) An eligible licensee qualifying as a small business under Section 90.814(b)(1)(ii) may make
interest-only payments for the first two years of the license term. Interest will accrue at the
Treasury note rate plus an additional 2.5 percent. Payments of interest and principal shall be
amortized over the remaining eight years of the license term.
(b) Unjust Enrichment.
(1) If a licensee that utilizes installment financing under this section seeks to assign or transfer
control of its license to an entity not meeting the eligibility standards for installment payments,
the licensee must make full payment of the remaining unpaid principal and any unpaid interest
accrued through the date of assignment or transfer as a condition of approval.
(2) If a licensee that utilizes installment financing under this section seeks to make any change
in ownership structure that would result in the licensee losing eligibility for installment
payments, the licensee shall first seek Commission approval and must make full payment of the
remaining unpaid principal and any unpaid interest accrued through the date of such change as a
condition of approval.
(3) If a licensee that utilizes installment financing under this section seeks to assign or transfer
control of a license to an entity that does not qualify for as favorable an installment payment
plan, the installment payment plan for which the acquiring entity qualifies will become effective
immediately upon transfer.
§ 90.813 Procedures for partitioned licenses.
(a) Notwithstanding § 90.661, a rural telephone company, as defined in § 90.814, may be
granted a 900 MHz SMR license that is geographically partitioned from a separately licensed
MTA, so long as the MTA applicant or licensee has voluntarily agreed (in writing) to partition a
portion of the license to the entity.
(b) If partitioned licenses are being applied for in conjunction with a license(s) to be awarded
through competitive bidding procedures --
(1) The applicable procedures for filing short-form applications and for submitting upfront
payments and down payments contained in this Part and Part 1 of this Chapter shall be followed
by the applicant, who must disclose as part of its short-form application all parties to
agreement(s) with or among other entities to partition the license pursuant to this section, if won
at auction (see 47 CFR §1.2105(a)(2)(viii));
(2) Each rural telephone company that is a party to an agreement to partition the license shall
file a long-form application for its respective, mutually agreed-upon geographic area together
with the application for the remainder of the MTA filed by the auction winner.
(c) If the partitioned license is being applied for as a partial assignment of the MTA license
following grant of the initial license, request for authorization for partial assignment of a license
shall be made pursuant to § 90.153.
(d) Each application for a partitioned area (long-form initial application or partial assignment
application) shall contain a partitioning plan that must propose to establish a partitioned area to
be licensed that meets the following criteria:
(1) Conforms to established geopolitical boundaries (such as county lines);
(2) Includes the wireline service area of the rural telephone company applicant; and
(3) Is reasonably related to the rural telephone company's wireline service area.
NOTE: A partitioned service area will be presumed to be reasonably related to the rural
telephone company's wireline service area if the partitioned service area contains no more than
twice the population overlap between the rural telephone company's wireline service area and the
partitioned area.
(e) Each licensee in each partitioned area will be responsible for meeting the construction
requirements in its area (see § 90.665).
§ 90.814 Definitions.
(a) Scope. The definitions in this section apply to §§ 90.810 through 90.813, unless otherwise
specified in those sections.
(b) Small Business: Consortium of Small Businesses.
(1) A small business is an entity that either:
(i) together with its affiliates, persons or entities that hold attributable interests in such entity,
and their affiliates, has average gross revenues that are not more than $3 million for the
preceding three years; or
(ii) together with its affiliates, persons or entities that hold attributable interests in such entity,
and their affiliates, has average gross revenues that are not more than $15 million for the
preceding three years.
(2) For purposes of determining whether an entity meets either the $3 million or $15 million
average annual gross revenues size standard set forth in paragraph (b)(1) of this section, the gross
revenues of the entity, its affiliates, persons or entities holding interests in the entity and their
affiliates shall be considered on a cumulative basis and aggregated, subject to the exceptions set
forth § 90.814(g).
(3) A small business consortium is a conglomerate organization formed as a joint venture
between or among mutually-independent business firms, each of which individually satisfies
either definition of a small business in paragraphs (b)(1) and (b)(2) of this section. In a
consortium of small businesses, each individual member must establish its eligibility as a small
business, as defined in this section.
(c) Rural Telephone Company. A rural telephone company is a local exchange carrier having
100,000 or fewer access lines, including all affiliates.
(d) Gross Revenues. For applications filed after December 31, 1994, gross revenues shall be
evidenced by audited financial statements for the preceding relevant number of calendar or fiscal
years. If an entity was not in existence for all or part of the relevant period, gross revenues shall
be evidenced by the audited financial statements of the entity's predecessor-in-interest or, if there
is no identifiable predecessor-in-interest, unaudited financial statements certified by the applicant
as accurate.
(e) Businesses Owned by Members of Minority Groups and/or Women. A business owned by
members of minority groups and/or women in which minorities and/or women who are U.S.
citizens control the applicant, have at least 50.1 percent equity ownership and, in the case of a
corporate applicant, a 50.1 percent voting interest. For applicants that are partnerships, every
general partner either must be a minority and/or woman (or minorities and/or women) who are
U.S. citizens and who individually or together own at least 50.1 percent of the partnership equity,
or an entity that is 100 percent owned and controlled by minorities and/or women who are U.S.
citizens. The interests of minorities and women are to be calculated on a fully-diluted basis;
agreements such as stock options and convertible debentures shall be considered to have a
present effect on the power to control an entity and shall be treated as if the rights thereunder
already have been fully exercised. However, upon a demonstration that options or conversion
rights held by non-controlling principals will not deprive the minority and female principals of a
substantial financial stake in the venture or impair their rights to control the designated entity, a
designated entity may seek a waiver of the requirement that the equity of the minority and female
principals must be calculated on a fully-diluted basis.
(f) Members of Minority Groups. Members of minority groups includes Blacks, Hispanics,
American Indians, Alaskan Natives, Asians, and Pacific Islanders.
(g) Attributable Interests. Partnership and other ownership interests and any stock interest
amounting to 20 percent or more of the equity, or outstanding stock, or outstanding voting stock
of a licensee or applicant will be attributable.
(1) Multiplier. Ownership interests that are held indirectly by any party through one or more
intervening corporations will be determined by successive multiplication of the ownership
percentages for each link in the vertical ownership chain and application of the relevant
attribution benchmark to the resulting product, except that if the ownership percentage for an
interest in any link in the chain exceeds 50 percent or represents actual control, it shall be treated
as if it were a 100 percent interest.
(h) Affiliate.
(1) Basis for Affiliation. An individual or entity is an affiliate of an applicant or of a person
holding an attributable interest in an applicant (both referred to herein as "the applicant") if such
individual or entity:
(i) Directly or indirectly controls or has the power to control the applicant, or
(ii) Is directly or indirectly controlled by the applicant, or
(iii) Is directly or indirectly controlled by a third party or parties that also controls or has the
power to control the applicant, or
(iv) Has an "identity of interest" with the applicant.
(2) Nature of control in determining affiliation.
(i) Every business concern is considered to have one or more parties who directly or indirectly
control or have the power to control it. Control may be affirmative or negative and it is
immaterial whether it is exercised so long as the power to control exists.
Example for paragraph (h)(2)(i). An applicant owning 50 percent of the voting stock of
another concern would have negative power to control such concern since such party can block
any action of the other stockholders. Also, the bylaws of a corporation may permit a stockholder
with less than 50 percent of the voting to block any actions taken by the other stockholders in the
other entity. Affiliation exists when the applicant has the power to
control a concern while at the same time another person, or persons, are in control of
the concern at the will of the party or parties with the power of control.
(ii) Control can arise through stock ownership; occupancy of director, officer or key employee
positions; contractual or other business relations; or combinations of these and other factors. A
key employee is an employee who, because of his/her position in the concern, has a critical
influence in or substantive control over the operations or management of the concern.
(iii) Control can arise through management positions where a concern's voting stock is so
widely distributed that no effective control can be established.
Example for paragraph (h)(2)(iii). In a corporation where the officers and directors own
various size blocks of stock totaling 40 percent of the corporation's voting stock, but no officer or
director has a block sufficient to give him or her control or the power to control and the
remaining 60 percent is widely distributed with no individual stockholder having a stock interest
greater than 10 percent, management has the power to control. If persons with such management
control of the other entity are persons with attributable interests in the applicant, the other entity
will be deemed an affiliate of the applicant.
(3) Identity of interest between and among persons. Affiliation can arise between or among two
or more persons with an identity of interest, such as members of the same family or persons with
common investments. In determining if the applicant controls or is controlled by a concern,
persons with an identity of interest will be treated as though they were one person.
Example 1. Two shareholders in Corporation Y each have attributable interests in the same
SMR application. While neither shareholder has enough shares to individually control
Corporation Y, together they have the power to control Corporation Y. The two shareholders
with these common investments (or identity of interest) are treated as though they are one person
and Corporation Y would be deemed an affiliate of the applicant.
Example 2. One shareholder in Corporation Y, shareholder A, has an attributable interest in a
SMR application. Another shareholder in Corporation Y, shareholder B, has a nonattributable
interest in the same SMR application. While neither shareholder has enough shares to
individually control Corporation Y, together they have the power to control Corporation Y.
Through the common investment of shareholders A and B in the SMR application, Corporation
Y would still be deemed an affiliate of the applicant.
(i) Spousal Affiliation. Both spouses are deemed to own or control or have the power to control
interests owned or controlled by either of them, unless they are subject to a legal separation
recognized by a court of competent jurisdiction in the United States.
(ii) Kinship Affiliation. Immediate family members will be presumed to own or control or have
the power to control interests owned or controlled by other immediate family members. In this
context "immediate family member" means father, mother, husband, wife, son, daughter, brother,
sister, father- or mother-in-law, son- or daughter-in-law, brother- or sister-in-law, step-father, or
-mother, step-brother, or -sister, step-son, or -daughter,
half brother or sister. This presumption may be rebutted by showing that
(A) The family members are estranged,
(B) The family ties are remote, or
(C) The family members are not closely involved with each other in business matters.
Example for paragraph (h)(3)(ii). A owns a controlling interest in Corporation X. A's
sister-in-law, B, has an attributable interest in an SMR application. Because A and B have a
presumptive kinship affiliation, A's interest in Corporation X is attributable to B, and thus to the
applicant, unless B rebuts the presumption with the necessary showing.
(4) Affiliation through stock ownership.
(i) An applicant is presumed to control or have the power to control a concern if he or she owns
or controls or has the power to control 50 percent or more of its voting stock.
(ii) An applicant is presumed to control or have the power to control a concern even though he
or she owns, controls or has the power to control less than 50 percent of the concern's voting
stock, if the block of stock he or she owns, controls or has the power to control is large as
compared with any other outstanding block of stock.
(iii) If two or more persons each owns, controls or has the power to control less than 50 percent
of the voting stock of a concern, such minority holdings are equal or approximately equal in size,
and the aggregate of these minority holdings is large as compared with any other stock holding,
the presumption arises that each one of these persons individually controls or has the power to
control the concern; however, such presumption may be rebutted by a showing that such control
or power to control, in fact, does not exist.
(5) Affiliation arising under stock options, convertible debentures, and agreements to merge.
Stock options, convertible debentures, and agreements to merge (including agreements in
principle) are generally considered to have a present effect on the power to control the concern.
Therefore, in making a size determination, such options, debentures, and agreements will
generally be treated as though the rights held thereunder had been exercised. However, neither
an affiliate nor an applicant can use such options and debentures to appear to terminate its control
over another concern before it actually does so.
Example 1 for paragraph (h)(5). If company B holds an option to purchase a controlling
interest in company A, who holds an attributable interest in an SMR application, the situation is
treated as though company B had exercised its rights and had become owner of a controlling
interest in company A. The gross revenues of company B must be taken into account in
determining the size of the applicant.
Example 2 for paragraph (h)(5). If a large company, BigCo, holds 70% (70 of 100 outstanding
shares) of the voting stock of company A, who holds an attributable interest in an SMR
application, and gives a third party, SmallCo, an option to purchase 50 of the 70 shares owned by
BigCo, BigCo will be deemed to be an affiliate of company, and thus the applicant, until
SmallCo actually exercises its options to purchase such shares. In order to prevent BigCo from
circumventing the intent of the rule which requires such options to be considered on a fully
diluted basis, the option is not considered to have present effect in this case.
Example 3 for paragraph (h)(5). If company A has entered into an agreement to merge with
company B in the future, the situation is treated as though the merger has taken place.
(6) Affiliation under voting trusts.
(i) Stock interests held in trust shall be deemed controlled by any person who holds or shares
the power to vote such stock, to any person who has the sole power to sell such stock, and to any
person who has the right to revoke the trust at will or to replace the trustee at will.
(ii) If a trustee has a familial, personal or extra-trust business relationship to the grantor or the
beneficiary, the stock interests held in trust will be deemed controlled by the grantor or
beneficiary, as appropriate.
(iii) If the primary purpose of a voting trust, or similar agreement, is to separate voting power
from beneficial ownership of voting stock for the purpose of shifting control of or the power to
control a concern in order that such concern or another concern may meet the Commission's size
standards, such voting trust shall not be considered valid for this purpose
regardless of whether it is or is not recognized within the appropriate jurisdiction.
(7) Affiliation through common management. Affiliation generally arises where officers,
directors, or key employees serve as the majority or otherwise as the controlling element of the
board of directors and/or the management of another entity.
(8) Affiliation through common facilities. Affiliation generally arises where one concern shares
office space and/or employees and/or other facilities with another concern, particularly where
such concerns are in the same or related industry or field of operations, or where such concerns
were formerly affiliated, and through these sharing arrangements one concern
has control, or potential control, of the other concern.
(9) Affiliation through contractual relationships. Affiliation generally arises where one concern
is dependent upon another concern for contracts and business to such a degree that one concern
has control, or potential control, of the other concern.
(10) Affiliation under joint venture arrangements.
(i) A joint venture for size determination purposes is an association of concerns and/or
individuals, with interests in any degree or proportion, formed by contract, express or implied, to
engage in and carry out a single, specific business venture for joint profit for which purpose they
combine their efforts, property, money, skill and knowledge, but not on a continuing or
permanent basis for conducting business generally. The determination
whether an entity is a joint venture is based upon the facts of the business operation, regardless of
how the business operation may be designated by the parties involved. An agreement to share
profits/losses proportionate to each party's contribution to the business operation is a significant
factor in determining whether the business operation is a joint venture.
(ii) The parties to a joint venture are considered to be affiliated with each other.
§ 90.815 Eligibility for Small Business Status
(a) Short-Form Applications: Certifications and Disclosure.
Each applicant for an MTA license which qualifies as a small business or consortium of small
businesses shall append the following information as an exhibit to its short-form application
(Form 175):
(1) The identity of the applicant's affiliates, persons or entities that hold attributable interests
in such entity, and their affiliates, and, if a consortium of small businesses, the members in the
joint venture; and
(2) The applicant's gross revenues, computed in accordance with § 90.814.
(b) Long Form Applications: Certifications and Disclosure.
In addition to the requirements in subpart U of this part, each applicant submitting a long-form
application for license(s) and qualifying as a small business shall, in an exhibit to its long-form
application:
(1) Disclose separately and in the aggregate the gross revenues, computed in accordance
with § 90.814, for each of the following: the applicant; the applicant's affiliates, the applicant's
attributable investors, affiliates of its attributable investors, and, if a consortium of small
businesses, the members of the joint venture;
(2) List and summarize all agreements or other instruments (with appropriate references to
specific provisions in the text of such agreements and instruments) that support the applicant's
eligibility as a small business under §§90.810 through 90.812, including the establishment of de
facto and de jure control; such agreements and instruments include articles of incorporation and
bylaws, shareholder agreements, voting or other trust agreements, franchise agreements, and any
other relevant agreements (including letters of intent), oral or written; and
(3) List and summarize any investor protection agreements, including rights of first refusal,
supermajority clauses, options, veto rights, and rights to hire and fire employees and to appoint
members to boards of directors or management committees.
(c) Records Maintenance. All winning bidders qualifying as small businesses, shall maintain at
their principal place of business an updated file of ownership, revenue and asset information,
including any documents necessary to establish eligibility as a small business and/or consortium
of small businesses under § 90.814. Licensees (and their successors in interest) shall maintain
such files for the term of the license.
(d) Audits.
(1) Applicants and licensees claiming eligibility as a small business or consortium of small
businesses under §§ 90.810 through 90.812 shall be subject to audits by the Commission, using
in-house and contract resources. Selection for audit may be random, on information, or on the
basis of other factors.
(2) Consent to such audits is part of the certification included in the short-form application
(Form 175). Such consent shall include consent to the audit of the applicant's or licensee's
books, documents and other material (including accounting procedures and practices) regardless
of form or type, sufficient to confirm that such applicant's or licensee's representations are, and
remain, accurate. Such consent shall include inspection at all reasonable times of the facilities,
or parts thereof, engaged in providing and transacting business, or keeping records regarding
licensed 900 MHz SMR service and shall also include consent to the interview of principals,
employees, customers and suppliers of the applicant or licensee.
(e) Definitions. The terms affiliate, business owned by members of minority groups and/or
women, consortium of small businesses, gross revenues, members of minority groups,
nonattributable equity, small business and total assets used in this section are defined in §
90.814. APPENDIX B
FINAL REGULATORY FLEXIBILITY ANALYSIS
Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C. § 603, the Commission incorporated
an Initial Regulatory Flexibility Analysis (IRFA) into the Further Notice of Proposed Rule
Making. Written public comments on the IRFA were requested. The Commission's final
regulatory flexibility analysis for this Seventh Report and Order in PP Docket No. 93-253 is as
follows:
A. NEED FOR AND PURPOSE OF RULES
1. This rule making proceeding was initiated to secure comment on proposals for
establishing a flexible regulatory scheme for the 900 MHz Specialized Mobile Radio (SMR)
service that would promote efficient licensing and enhance the service's competitive potential in
the commercial mobile radio marketplace. The proposals adopted herein are also designed to
implement Congress's goal of giving small businesses, rural telephone companies, and
businesses owned by members of minority groups and women the opportunity to participate in
the provision of spectrum-based services in accordance with 47 U.S.C. § 309(j)(4)(D).
B. ISSUES RAISED BY THE PUBLIC IN RESPONSE TO THE INITIAL ANALYSIS
2. No comments were submitted specifically in response to the Initial Regulatory Flexibility
Analysis.
C. SIGNIFICANT ALTERNATIVES CONSIDERED
3. The Second Further Notice of Proposed Rule Making in this proceeding offered
numerous proposals. All significant alternatives have been addressed in the Seventh Report and
Order. The majority of commenters supported the major tenets of the proposed rules and some
commenters suggested changes to some of the Commission's proposals. Any regulatory burdens
we have adopted for applicants (for example, small businesses) in the 900 MHz SMR applicants
are necessary to carry out our duties under the Communications Act of 1934, as amended, and
the Omnibus Budget Reconciliation Act of 1993.
APPENDIX C
COMMENTERS
American Mobile Telecommunications Association, Inc. (AMTA)
Celsmer
Geotek
Minority Business Enterprise Legal Defense and Education Fund, Inc. (MBELDEF)
Motorola, Inc.
National Association of Black Owned Broadcasters (NABOB)
National Paging and Personal Communications Association (NPPCA)
National Telephone Cooperative Association (NTCA)
Nextel Communications, Inc.
Personal Communications Industry Association (PCIA)
Pro Tec Communications, Inc.
RAM Mobile Data USA Limited Partnership (RAM)
Small Common Carrier Coalition (SCCC)
Southern California Edison Company (SCE)
Office of the Chief Counsel for Advocacy of the United States Small Business Administration
(SBA)
REPLY COMMENTERS
American Mobile Telecommunications Association, Inc (AMTA)
Celsmer
The Council of Independent Communications Suppliers (CICS)
Geotek Communications, Inc. (Geotek)
Monterey Telecommunications Technology (Monterey)
Motorola, Inc.
Personal Communications Industry Association (PCIA)
RAM Mobile Data USA Limited Partnership (RAM)
PETITIONERS
Advanced Mobilecomm, Inc. (AMI)
American Mobile Telecommunications Association (AMTA)
Celsmer
DW Communications, Inc. (DW)
Geotek Communications, Inc. (Geotek)
Nextel
Personal Communications Industry Association (PCIA)
RAM Mobile Data USA Limited Partnership (RAM)
Southern California Edison Company (SCE)